J>att,  Sc&affner  & 

(Economic 


THE  CAUSE  AND  EXTENT  OF  THE  RECENT  INDUS- 
TRIAL PROGRESS  OF  GERMANY.  By  Earl  D.  Howard. 

THE  CAUSES  OF  THE  PANIC  OF  1893.  By  William  J. 
Lauck. 

INDUSTRIAL  EDUCATION.  By  Harlow  Stafford  Person, 
Ph.D. 

FEDERAL  REGULATION  OF  RAILWAY  RATES.  By  Al- 
bert N.  Merritt,  Ph.D. 

SHIP  SUBSIDIES.  An  Economic  Study  of  the  Policy  of  Sub- 
sidizing Merchant  Marines.  By  Walter  T.  Dunmore. 

SOCIALISM:  A  CRITICAL  ANALYSIS.     By  O.  D.  Skelton. 

INDUSTRIAL  ACCIDENTS  AND  THEIR  COMPENSATION. 
By  Gilbert  L.  Campbell,  B.  S. 

THE  STANDARD  OF  LIVING  AMONG  THE  INDUSTRIAL 
PEOPLE  OF  AMERICA.  By  Frank  H.  Streightoff. 

THE    NAVIGABLE   RHINE.     By  Edwin  J.  Clapp. 

HISTORY  AND  ORGANIZATION  OF  CRIMINAL  STATIS- 
TICS IN  THE  UNITED  STATES.  By  Louis  Newton 
Robinson. 

SOCIAL  VALUE.    By  B.  M.  Anderson,  Jr. 
FREIGHT  CLASSIFICATION.     By  J.  F.  Strombeck. 

WATERWAYS  VERSUS  RAILWAYS.  By  Harold  Glenn 
Moulton. 

THE  VALUE  OF  ORGANIZED  SPECULATION.  By  Harri- 
son H.  Brace. 

INDUSTRIAL  EDUCATION:  ITS  PROBLEMS,  METHODS 
AND  DANGERS.  By  Albert  H.  Leake. 

THE  UNITED  STATES  INTERNAL  TAX  HISTORY  FROM 
I  86 1  TO  I  87  I .  By  Harry  Edwin  Smith. 

WELFARE  AS  AN  ECONOMIC  QUANTITY.  By  G.  P. 
Watkins. 

CONCILIATION  AND  ARBITRATION  IN  THE  COAL 
INDUSTRY  IN  THE  UNITED  STATES.  By  Arthur  E. 
Suffern. 

THE  CANADIAN  IRON  AND  STEEL  INDUSTRY.  By  W.  J. 
A.  Donald. 

HOUGHTON  MIFFLIN  COMPANY 

BOSTON  AND  NEW  YORK 


(JUatx 


XVII 

WELFARE  AS  AN  ECONOMIC  QUANTITY 


WELFAEE  AS  AN  ECONOMIC 
QUANTITY 


BY 


G.  P.  WATKINS 


BOSTON  AND  NEW   YORK 
HOUGHTON  MIFFLIN  COMPANY 


1915 


COPYRIGHT,   1915,   BY  HART,   SCHAFFNER  &  MARX 
ALL  RIGHTS  RESERVED 

Published  Februar 


PREFACE 

THIS  series  of  books  owes  its  existence  to  the  generosity  of 
Messrs.  Hart,  Schaffner  &  Marx,  of  Chicago,  who  have 
shown  a  special  interest  in  trying  to  draw  the  attention  of 
American  youth  to  the  study  of  economic  and  commercial 
subjects.  For  this  purpose  they  have  delegated  to  the  un- 
dersigned committee  the  task  of  selecting  or  approving  of 
topics,  making  announcements,  and  awarding  prizes  annu- 
ally for  those  who  wish  to  compete. 

For  the  year  ending  June  1,  1913,  there  were  offered:  — 

In  Class  A,  which  included  any  American  without  re- 
striction, a  first  prize  of  $1000,  and  a  second  prize  of  $500. 

In  Class  B,  which  included  any  who  were  at  the  time 
undergraduates  of  an  American  college,  a  first  prize  of 
$300,  and  a  second  prize  of  $200. 

Any  essay  submitted  in  Class  B,  if  deemed  of  sufficient 
merit,  could  receive  a  prize  in  Class  A. 

The  present  volume,  submitted  in  Class  A,  was  awarded 
the  second  prize  in  that  class. 

J.  LAURENCE  LAUGHLIN,  Chairman. 

University  of  Chicago. 
JOHN  B.  CLARK, 

Columbia  University. 
HENRY  C.  ADAMS, 

University  of  Michigan. 
HORACE  WHITE, 

New  York  City. 
EDWIN  F.  GAY, 

Harvard  University. 


AUTHOR'S  PREFACE 

THIS  essay  is  a  study  in  the  neglected  field  of  economic 
consumption.  It  is  a  fragment  of  what  was  planned  as  a 
comprehensive  treatise  of  this  division  of  economics,  and 
largely  developed  during  my  graduate  work  at  Cornell 
University.  But  the  part  may  be  the  better  for  standing 
by  itself.  It  is  frankly  theoretical  in  general  character.  I 
quite  agree  that  questions  susceptible  of  detailed  inductive 
or  statistical  investigation  should  receive  such  treatment 
instead  of  merely  being  given  their  place  in  a  theory.  That, 
however,  must  come  later. 

Most  of  the  essay  assumes  familiarity  with  the  concepts 
and  terms  of  recent  economics  and  is  technical  in  its  inter- 
est. Certain  chapters,  however,  —  which  are  not  among 
the  earliest,  —  may  perhaps  be  intelligible  and  interesting 
to  the  reader  whose  chief  equipment  is  common  knowledge 
and  common  sense.  These  are  especially  chapters  vin  (with 
vii  as  preliminary)  and  xvi;  and  also,  though  to  a  less  de- 
gree, chapters  v,  xi,  xm,  xiv,  and  xv.  Whether  a  person 
of  practical  or  reformative  interest  would  be  justified  in 
going  directly  to  the  concluding  chapter  is  to  be  doubted. 

No  fundamental  premises  of  economic  thought  are  es- 
sentially affected  by  the  ideas  contained  in  this  essay.  It 
does  propose  certain  qualifications  and  extensions  of  ac- 
cepted principles.  What  may  be  considered  the  general 
contribution  it  makes  consists  in  the  incorporation  into 
systematic  economic  thought  of  some  ideas  that  are,  if 
not  themselves  new,  such  as  can  be  found  elsewhere  — 
perhaps  in  common  thought  or  in  writings  of  no  scientific 
standing  —  only  as  disconnected  apergus. 

My  scientific  obligations,  and  the  interrelations  of  the 
ideas  developed  to  those  of  others,  are  indicated  in  text 


viii  AUTHOR'S   PREFACE 

and  in  footnotes,  but  I  am  not  sure  that  all  have  been  duly 
noted,  since  the  matter  was  originally  written  some  time 
ago  and  has  undergone  many  changes.  Though  much  that  \ 
is  characteristic  of  the  Austrians  —  Menger,  Wieser,  and  ; 
Bohm-Bawerk  —  is  not  accepted  here,  my  point  of  depar- 
ture is  obviously  the  same  as  theirs.  The  development  from 
that  point  is  in  a  different  direction.  The  differences  that 
emerge  are  partly,  though  not  wholly,  due,  to  this  diver- 
gence of  the  subjects  treated.  The  essay  is,  however, 
largely  a  criticism  of  the  usual  exposition  of  utility  doc- 
trine. Suggestions  received  from  recent  American  theory 
are  also  frequently  negative,  belonging,  that  is,  in  the 
category  of  association  by  contrast  or  opposition. 

The  manuscript  has  been  subjected  to  the  criticism  of 
Professor  Alvin  S.  Johnson,  who  acted  in  place  of  Pro- 
fessor Clark  as  a  judge  of  the  papers  submitted  to  the 
Hart,  Schaffner  &  Marx  Committee  and  has  reviewed  on 
its  behalf  the  essay  here  published.  He  has  made  im- 
portant suggestions  regarding  terminology  and  also  to- 
ward connecting  up  the  ideas  presented  with  those  of 
other  economic  theorists,  and  he  has  made  it  necessary  for 
me  to  elaborate  and  defend  or  to  amend  certain  points. 
But  I  have  no  reason  to  suppose  that  he  would  accept  as 
valid  all  the  theories  here  set  forth.  With  this  exception 
the  essay  has  not  had  the  benefit  of  the  friendly  criticism 
of  economists.  But  I  am  much  indebted  to  two  of  my 
associates  in  the  Bureau  of  Statistics  and  Accounts  of 
the  Public  Service  Commission,  namely,  to  Mr.  James  L. 
Bahret,  for  numerous  valuable  editorial  suggestions,  and 
to  Mr.  L.  H.  Lubarsky,  not  only  for  drafting  the  diagrams, 
but  for  important  mathematical  assistance,  including 
certain  notes  bearing  his  initials.  Acknowledgment  is  also 
due  to  Professor  John  B.  Clark  for  encouraging  me  to  com- 
plete and  publish  this  little  book,  which  was  first  presented 
on  somewhat  the  present  plan  as  a  paper  in  his  seminar. 

G.  P.  WATKINB. 

NEW  YORK  CITY, 

May  31,  1914. 


CONTENTS 


INTRODUCTION.  WELFARE  AND  UTILITY xix 

The  title  of  this  essay  implies  a  dependence  of  welfare  upon 
economic  conditions  —  The  "variation  of  utility"  a  technical 
description  of  the  subject  —  What  constitutes  welfare  —  Rela- 
tion of  utility  to  welfare  —  Neither  word  is  definitely  objective 
or  definitely  subjective  in  meaning  —  The  sense  in  which  wel- 
fare is  an  economic  quantity  —  That  "welfare"  connotes 
sociality  more  than  does  "utility"  is  not  an  essential  difference 

—  The  quantitative  variation  of  utility  is  the  connecting  link 
between  goods  and  welfare  —  There  are  several  species  of  utility 
and  their  variation  is  complex  —  The  economic  aspect  of  welfare 
is  essential,  though  not  exhaustive  —  Moral  judgment  requires 
economic  as  well  as  other  knowledge  —  Scope  of  following  chap- 
ters —  Underlying  assumption  that  men  are  hi  general  reason- 
able. 

CHAPTER  I.  UTILITY  DEFINED 1 

Utility  the  basic  idea  of  a  theory  of  consumption  —  The 
term  defined  —  The  abstract  term  for  a  relation  —  The  con- 
cept is  quantitative  —  The  term  has  a  collective  significance  — 
Specialization  of  goods  obscures  auxiliary  uses  —  The  discovery 
of  new  uses  and  the  refinement  of  old. 

The  quantitative  conception  of  utility  requires  a  measure  — 
The  conceptual  measure  of  utility  is  contribution  to  satisfaction 

—  The  power  to  satisfy  must  be  susceptible  of  generalization — 
Expectations  must  be  reasonable  —  Utility  is  not  proportioned 
to  merely  marginal  satisfaction;  instance  the  good  that  is,  for 
the  consumption  of  a  small  private  economy,  unique  —  Equat- 
ing the  satisfactions  of  different  individuals  —  The  absence  of 
definite  allocation  of  super-marginal  utility  explains  but  does 
not  justify  its  neglect. 

CHAPTER  II.  THE  SPECIES  OF  UTILITY 10 

The  classification  of  the  relatively  homogeneous  is  not  impos- 
sible—  Familiar  divisions  of  utility:  Positive  and  negative; 
marginal,  super-marginal  and  free;  direct  and  indirect  —  Three- 
fold relation  of  goods  to  satisfaction:  (1)  independent;  (2)  de- 
pendent on  other  goods;  (3)  dependent  on  other  persons  — 
Definition  of  utility  proper  —  Particular  utility  —  Comple- 


x  CONTENTS 

mentary  utility  —  Dependence  of  the  utility  of  a  good  upon 
other  goods  not  to  be  taken  in  its  broadest  sense  —  Imputed 
utility — Transputed  utility — Its  relation  to  relative  scarcity — 
Transputed  utility  different  from  other  non-particular  utility  — 
Opposed  to  utility  proper  when  the  latter  is  on  the  same  level 
—  Adventitious  utility  —  May  appear  in  the  complementary 
relation  —  The  socio-psychical  factor  —  Both  transputed  and 
adventitious  utility  presuppose  economic  value  —  Utility 
classified  as  processive  and  existential  —  Multiple  utility  — 
The  relations  of  these  species  of  utility  reviewed. 

CHAPTER    III.    THE  LAW  OF  DIMINISHING  UTILITY  .    .   20 

Diminution  of  utility  is  not  the  only  type  of  quantitative 
variation  —  What  constitutes  a  supply  from  this  viewpoint  — 
Homogeneity  is  essential  —  Diversity  and  precedence,  not  the 
character  of  the  supply,  account  for  the  regular  diminution  of 
utility  —  The  diminishing  rate  of  diminution  —  The  abrupt  ter- 
mination of  the  curve  (only  an  apparent  exception)  due  to 
neglected  costs  —  Possible  relation  of  diminishing  utility  to 
general  psycho-physical  law  —  But  quantity  of  feeling  differs 
from  intensity  of  sensation  —  Weber's  Law  states  exactly  the 
presumptive  form  of  the  curve  —  Description  and  characteriza- 
tion of  Diagram  II,  showing  the  normal  curve  of  regular  dimi- 
nution of  utility  —  It  is  a  rectangular  hyperbola,  that  is,  its 
equation  is  xy=c  —  Proof  and  construction  of  the  curve  — 
Since  initial  utility  is  seldom  infinite,  the  axis  of  ordinates  is 
usually  at  the  left  of  the  initial  point  of  the  supply  —  The  con- 
stant-outlay curve  —  Abstract  character  of  the  normal  law  — 
Actual  curves  seldom  normal,  but  never  straight  lines. 

DIAGRAM  I.  The  apparent  form  of  the  curve  of  diminishing 
utility  when  account  is  taken  of  such  costs  as  are  neglected  until 
marginal  utility  is  small 27 

DIAGRAM  II.  Normal  curve  of  diminishing  utility  constructed 
according  to  the  psycho-physical  law  as  a  rectangular  hyperbola  28 

CHAPTER  IV.    THE  SCOPE   AND  LIMITATIONS   OF   DI- 
MINISHING UTILITY 40 

Bearing  of  the  psychological  principle  of  accommodation 
upon  initial  utility  —  The  necessity  of  immediate  consumption, 
which  is  presupposed  in  case  of  negation  of  utility  through 
satiation,  is  not  to  be  regarded  as  the  usual  condition  —  The 
moderating  effect  of  substitution  upon  the  diminution  of 
utility  —  The  relative  and  economic  (not  physical)  character 
of  the  homogeneity  of  a  supply  —  All  goods  are,  for  certain 
purposes,  reducible  to  money  —  Increase  of  property  in  general 


CONTENTS  ri 

may  likewise  be  viewed  as  subject  to  diminishing  utility  —  But 
theoretical  diminution  may  become  practical  limitation  —  The 
oneness  of  a  want  no  criterion  for  defining  a  supply  —  The  case 
of  a  single  good  embodying  a  series  of  utilities  —  Its  obscuring 
effect  on  diminishing  utility  —  From  a  social  point  of  view  even 
such  goods  as  are  isolated  hi  actual  consumption  exhibit  regu- 
lar diminution  of  utility  —  The  difficulty  with  discontinuity 
vanishes  hi  the  case  of  a  social  curve  —  The  demand  curve 
considered  as  in  part  a  summation  of  utility  curves  —  The  in- 
dividual's demand  curve  has  the  same  form  as  his  utility  curve 
— The  summation  of  rectangular  hyperbolae  —  Meaning  of  the 
scales  —  Qualifications  —  Distortion  resulting  from  possible 
differences  of  slope  —  "Diminution  at  a  diminishing  rate"  still 
holds  in  any  abstract  case  —  Technical  meaning  of  *'  diminish- 
ing rate  "  —  Practical  value  of  the  conclusion  as  regards  sum- 
mation —  But  degree  of  utility  cannot  be  read  back  from  a  so- 
cial demand  curve — The  law  of  diminishing  utility  as  applied 
to  an  abstract  element  of  utility  embodied  hi  commercially  dif- 
ferent goods  —  Generally  abstract  character  of  the  principle. 

NOTE  on  the  commensurability  of  all  sorts  of  satisfaction  ...    44 

CHAPTER    V.    PROCESSIVE   UTILITY   AND  EXISTENTIAL 
UTILITY 58 

Double  reference  of  the  term  consumption  —  The  destruction 
of  goods  incident  to  consumption  is  of  fundamental  economic 
importance  —  But  it  is  hi  some  cases  not  necessary  to  enjoy- 
ment —  The  uses  of  such  goods  tend  to  be  free  —  The  destruc- 
tion is  sometimes  intended,  hence  two  sorts  of  consumption 
—  Processive  consumption  and  processive  utility  defined  — 
Existential  utility  —  Objects  of  sesthetic  appreciation  have 
such  utility  —  Objects  of  existential  utility  may  deteriorate, 
but  not  because  of  their  enjoyment  —  This  distinction  not 
entirely  parallel  with  that  between  perishability  and  durability 
1  —  Economically  perishable  goods  a  smaller  circle  within  those 
having  processive  utility  —  Physical  perishability  not  incon- 
sistent with  existential  enjoyment,  but  inimical  to  it  —  Physical 
and  economic  durability  combined  constitute  the  condition  most 
favorable  to  a  large  amount  of  existential  utility  —  Destruction 
of  utility  has  an  important  but  also  a  variable  place  in  consump- 
tion. 

The  relation  of  these  distinctions  to  saving  —  Saving  in  con- 
crete goods,  as  opposed  to  pecuniary  investment  —  High  possi- 
ble efficiency,  or  economy,  in  a  subjective  income  consisting  of 
existential  utility  —  The  relation  of  ownership  to  superior  cul- 
tivation of  land  —  The  capitalistic  ownership  of  articles  of  con- 
sumption is  especially  bad  —  Saving  in  concrete  goods  is  the 
most  fundamental  and  the  most  desirable  form  of  saving. 


xii  CONTENTS 

CHAPTER  VI.  RATE  OF  CONSUMPTION  IN  RELATION  TO 
DIMINUTION  OF  UTILITY 68 

Importance  of  rate  of  consumption  in  relation  to  diminution 
of  utility  —  Failure  in  ordinary  illustrations  to  take  account 
of  future  uses  —  High  perishability,  physical  even  more  deci- 
sively than  economic,  compels  a  high  rate  of  diminution  —  Sub- 
stitution and  preservative  measures  as  means  of  partial  escape 

—  Physically  perishable  goods  ministering  to  existential  wants 

—  Elasticity  of  demand  is  only  partly  a  phase  of  rate  of  diminu- 
tion of  utility;  the  expansion  of  demand  often  not  sufficient  to 
encourage  the  lowering  of  price  —  How  high  rates  of  diminution 
are  veiled  for  the  city-dweller. 

Storage  or  preservation  of  goods  makes  time  a  factor  in  the 
rate  of  diminution  of  utility  —  Economic  perishability  means  a 
high  rate  of  consumption  —  But  restricted  utilization  and  rapid 
diminution  of  utility  may  be  evaded  by  storing — Postponing  the 
use  of  part  of  a  supply  (distinct  from  costs  of  keeping)  has  thus 
an  effect  on  diminution  of  utility  —  Discounting  for  futurity  of 
use  may  be  the  only  reason  for  diminution  —  Illustration  of 
future  discount  —  Where  consumption  is  processive  and  goods 
are  not  physically  perishable,  utility  apart  from  costs  need 
never  become  zero  —  Check  from  lack  of  room  for  storage  in  the 
city  —  Exchange  as  a  factor  —  Abundance  fosters  a  preference 
for  solid  and  durable  goods  and  for  existential  utilities  —  Time 
discount  a  factor  in  the  diminution  of  the  utility  of  most  goods. 

The  case  of  existential  utility  embodied  in  goods  absolutely 
durable  physically,  i.e.,  with  a  zero  rate  of  consumption  —  As 
regards  diminishing  utility  this  case  not  complicated  by  time 
discount  —  An  analogy  —  Rate  of  diminution  for  such  goods 
not  necessarily  but  probably  low  —  Rates  of  supply  contrasted 
with  amounts  supplied  once  for  all  —  Future  discount  the  link 
between  the  two  sorts  of  supply  —  Concrete  cases  are  mixed  — 
Order  of  preference  between  different  sorts  of  goods  —  Risk  an 
independent  question. 

Conclusion:  Rate  of  diminution  of  utility  is  affected  by  rate 
of  objective  consumption  as  well  as  by  need  or  subjective  factors. 

CHAPTER  VII.  THE  COMPLEMENTARY  RELATION  ...    83 

Variety  and  utility  —  Refinement  in  consumption  —  Diver- 
sity of  use  intensifies  effectiveness  —  Partly  a  contrast  effect  — 
Heterogeneity  of  goods  the  opportunity  for  obtaining  comple- 
mentary utility  —  The  man  who  wants  more  wants,  not  only 
different  things,  but  complements  —  Increasing  utility  a  possi- 
ble effect  —  The  joint  utility  of  complements  does  not  conform 
to  the  principle  of  diminishing  utility  —  The  Austrians  con- 
sider the  complementary  relation  of  productive  agents  only  — 
Illustration  of  the  complex  character  of  relations  of  goods  to 


CONTENTS  xiii 

each  other  —  Complementary  utility  in  household  economics  — 
Comfort  —  Why  mere  sumptuousness  is  bad. 

Heterogeneity  practically,  if  not  logically,  necessary  to  the 
complementary  relation  —  Group  utility  more  than  a  mere  con- 
trast effect  —  The  complementary  relation  is  of  more  than 
merely  economic  interest. 

CHAPTER  VIII.  THE  STANDAED  OF  LIFE  AS  BASED  UPON 
COMPLEMENTARY  UTILITY 91 

The  standard  of  life  is  a  case  of  the  complementary  relation  — 
Why,  when  destroyed,  not  easily  reestablished  —  Economic 
environment  in  relation  to  the  standard  —  The  disadvantage 
of  a  cheap  staple  food  —  High  ratio  of  cost  of  manufacture  to 
cost  of  raw  materials  unfavorable  to  a  high  standard  —  Rela- 
tively cheap  food  less  desirable  —  Illustration  of  the  effect  of 
relative  costs  upon  the  character  of  dwellings  in  country  and  city 
—  The  demand  for  decencies  —  A.  vis  a  tergo  also  helps  to  sus- 
tain a  high  standard  of  lif  e.  j 

Incidence  of  economic  conditions  upon  the  family  —  Its  eco- 
nomic function  now  is  the  care  of  consumption  —  The  transmit- 
ting medium  for  a  high  standard  of  life  —  The  dynamic  char- 
acter of  this  subject. 

CHAPTER   IX.    COMPLEMENTARY  UTILITY  IN  RELATION 
TO  THE  VARIATION  OF  UTILITY 98 

The  importance  often  attached  to  goods  essential  to  one's 
standard  of  life  constitutes  an  exception  to  the  regular  diminu- 
tion of  utility  —  This  supposes  income  in  general  is  reducible 
to  a  common  denominator  —  Diminishing  utility  holds  of  par- 
ticular utility  regardless  of  heterogeneity  of  goods  —  But  it  need 
not  hold  of  complementary  utility  —  Typical  curve  of  dimin- 
ishing utility  —  Effect  of  the  introduction  of  complements  on 
the  curve  of  the  variation  of  utility  —  Physical  identification  of 
the  last  unit  or  definite  assignment  of  its  utility  no  more  essen- 
tial than  for  the  first  or  initial  unit  —  Complementary  utility 
cannot  be  obtained  in  the  largest  doses  with  the  earlier  units  — 
Illustration  by  the  elements  of  a  dinner  —  Suppose  extreme 
hunger  —  Suppose  moderate  hunger  and  patience  —  The  com- 
plementary relation  between  successive  goods  —  Suppose  each 
unit  chosen  as  if  the  last  obtainable  —  Personal  idiosyncracy  a 
complication  —  Complementary  utility  may  be  of  great  impor- 
tance for  the  variation  of  utility  without  causing  increasing 
utility;  illustrative  curve  —  Consumption  groupings  are  elastic 
and  some  complementary  utility  is  usually  in  prospect  —  In 
matters  psychical  2+2  may,  in  a  sense,  sometimes  equal  4  but 
are  just  as  likely  to  equal  3  (diminishing  utility)  or  5  (the  com- 


xiv  CONTENTS 

plementary  relation)  —  The  somewhat  dynamic  character  of 
complementary  utility  —  Accidents  have  obscured  the  effect 
of  complementary  utility  on  variation  —  Diminishing  utility 
the  more  objective  in  its  nature  —  Always  underlying  —  Holds 
unqualifiedly  for  particular  utility  —  Transient  character  as 
well  as  exceptional  occurrence  of  increasing  utility  —  Groups 
themselves,  though  like,  cannot  in  practice  form  a  supply  — 
Unlike  groups  do  not  constitute  separate  units  but  are  them- 
selves grouped  —  Complementary  utility  is  not  amenable  to 
marginal  or  market  conception  —  Its  possibilities  not  unlim- 
ited —  It  is  of  as  great  practical  importance  as  are  the  results  of 
diminishing  utility. 

DIAGRAM  III.   Possible  effect  of  complementary  utility  upon  the 
variation  of  utility  producing  increasing  utility 101 

DIAGRAM  IV.  Possible  effects  of  complementary  utility  upon  the 
variation  of  utility  amounting  to  less  than  increasing  utility    .  102 

CHAPTER     X.     IMPUTATION  AND    TRANSPUTATION   OF 
UTILITY 114 

Imputed  and  transputed  utility  are  somewhat  different  in 
relation  to  complementary  utility  —  Distribution  a  problem  hi 
imputation  —  Phases  of  this  problem  —  Conception  of  impu- 
tation brought  over  into  consumption  —  What  the  term  con- 
notes —  Imputation  applies  to  immediate  as  well  as  to  intermed- 
iate goods,  but  the  former  application  is  distinctive  enough  to  be 
given  a  separate  name,  transputation  —  Transputed  utility  as 
opposed  to  utility  proper — To  merely  complementary  utility  — 
Transputation  as  unbalanced  attribution  of  utility  —  Character 
of  the  criterion  —  Value  is  primary  in  transputation  as  well  as 
in  imputation  —  Character  of  the  variation  of  utility  under  the 
influence  of  transputation  —  Two  sorts  of  scarcity  —  Case  of 
goods  deprived  of  value  by  transputation  —  Illustrations  of  the 
effects  of  transputation  —  Elasticity  in  relation  to  it  —  Inse- 
curity of  high  transputed  value  —  Replacement  and  substitution 
as  limitations  upon  it. 

CHAPTER    XI.    THE  TRANSPUTED  CHARACTER  OF  THE 
INITIAL  UTILITY  OF  NECESSARIES .125 

The  supposed  high  degree  of  initial  utility  of  necessaries  — 
The  logic  of  the  valuation  of  means  —  The  value  of  life  —  The 
value  of  means  of  preserving  life  —  Instinctive  imputation  to 
necessaries  —  Character  of  the  utility  of  increments  of  income 
at  various  stages  —  Satisfaction  comes  chiefly  from  free  income 
—  Free  income  more  important  than  necessaries  —  Normally 
mere  necessaries  have  little  real  utility. 


CONTENTS  xv 

CHAPTER  XII.   CONTRASTED  SIGNIFICANCE  OF  MERELY 
COMPLEMENTARY  UTILITY  AND  TRANSPUTED  UTILITY  .  131 

Contrast  between  transputed  and  merely  complementary  util- 
ity as  regards  their  relations  to  welfare  —  The  former  a  part  of 
complementary  utility  definitely  apportioned  to  one  or  more 
members  of  a  group  —  Merely  complementary  utility  is  super- 
marginal—  Flexibility  of  groups  helps  in  maintaining  this  — 
Replaceability  bears  no  relation  to  amount  of  complementary 
utility,  but  much  to  that  of  transputed. 

Unimputed  complementary  (super-marginal)  utility  may 
indirectly  affect  demand  and  value  —  Analogy  of  the  rent  of 
land  —  Somewhat  dynamic  character  of  the  influence  —  Deter- 
mining power  of  marginal  increments  possibly  overrated  —  An 
article  that  is  unique  (whose  supply  for  the  purposes  of  a  con- 
sumer =1),  and  therefore  marginal,  will  usually  have  utility  hi 
excess  of  its  economic  value  (marginal  utility  in  the  market)  — 
Complementary  utility  is  either  imputed  and  transputed  or  else 
super-marginal  —  A  complementary  group  is  usually  unique  in 
a  particular  private  economy,  and  this  favors  the  super-marginal 
character  of  its  distinctive  utility  —  Economic  uniqueness,  also, 
of  goods  recurrently  needed  and  received. 

Unimputable  utility  —  Degree  of  economic  value  in  general, 
as  well  as  hi  the  case  of  transputed  utility,  not  a  measure  of 
the  favorableness  of  the  environment  to  man,  but  rather  the 
opposite. 

CHAPTER  XIII.  THE  NATURE  OF  ADVENTITIOUS  UTIL- 
ITY     141 

Definition  of  adventitious  utility  —  Luxury,  though  related, 
too  vague  to  be  identified  with  it  —  How  different  from  other 
species  of  utility  —  No  form  of  curve  specially  appropriate  to 
it  —  Its  socio-psychical  origin  does  not  bar  enjoyment  by  the 
consumer  as  if  it  were  due  to  intrinsic  qualities  —  Psychical 
parasitism  characteristic  —  Illustration  in  the  value  of  the 
diamond  —  Love  of  distinction  in  its  economic  expression  — 
Relativity  of  all  quantitative  judgments  the  soil  of  adventitious 
utility. 

CHAPTER    XIV.    SOCIAL   PHASES  AND  THE   ECONOMIC 
STATUS  OF  ADVENTITIOUS  UTILITY 146 

Adventitious  utility  a  socio-psychical  phenomenon  —  The 
class  standard  hi  consumption  —  Middle  class  sacrifices  to 
"keep  up  appearances"  — The  breaking  down  of  class  stand- 
ards —  Fashion  is  essentially  conf ormism  —  Adventitious  util- 
ity is  the  cause  of  changes  of  fashion  —  Adventitious  exploita- 


xvi  CONTENTS 

tion  of  personal  services  —  Objectively  immoral  character  of 
adventitious  consumption  —  Socio-economic  evil  —  But  largely 
of  the  nature  of  personal  vice  —  Value  without  utility  —  Mer- 
cantile exploitation  of  adventitious  motives  —  Taxation  of 
adventitious  utility  —  Progressive  elements  in  all  waste  —  The 
variation  of  adventitious  utility  protean  —  The  demand  is 
quantitatively  insatiable  —  Yet  the  net  subjective  effect  for 
society  remains  naught. 

CHAPTER   XV.  HOSTS  AND   MASKS  OF  ADVENTITIOUS 
UTILITY 155 

Host  and  parasite  —  The  parasite  must  usually  conceal  its 
true  character  —  ^Esthetic  enjoyment  as  a  mask  —  Comple- 
mentary effects  in  art  a  cover  —  The  complementary  use  of 
the  rare  —  Exaggerated  esteem  of  rare  articles  —  Genuineness 
improperly  associated  with  rarity  —  A  wrong  view  of  substi- 
tutes —  The  "best  quality"  is  relative  to  the  purpose  in  view 

—  It  is  not  the  rare  —  Perversion  of  economy  —  Natural  differ- 
ences versus  imitations  intended  to  deceive  —  The  best  should 
be  husbanded  —  Emphasis  on  "fineness"  of  quality  chiefly  ad- 
ventitious— Elegance  only  an  extrinsic  association  with  rarity — 
Adventitious  elements  permeate  the  economic  estimation  of 
all  things  that  require  much  expense  or  much  leisure  —  The 
situation  into  which  adventitious  utility  enters  is  always  mixed 

—  The  immorality  of  the  material  and  exclusive  superlative. 

CHAPTER  XVI.  MULTIPLE  UTILITY 163 

Multiple  utility  defined  —  Public  service  —  Analogy  of  mul- 
tiple with  existential  utility  —  The  less  strict  idea  of  multiple  or 
collective  utility  —  The  inducement  to  socialize  enjoyment  — 
Relation  to  equality  —  Public  property  has  reference  largely  to 
multiple  utility  —  Ability  or  inability  to  pay  for  use  not  always 
decisive  of  economy  —  Sometimes  the  state  may  well  change  an 
economic  into  a  free  good,  e.g.,  education  —  Public  health  — 
Transportation  more  clearly  of  direct  pecuniary  benefit  to  the 
individual  —  Durability  of  public  works  —  Monumental  public 
edifices  —  Unimputable  multiple  utility  of  the  natural  environ- 
ment —  Rate  of  exhaustion  of  minerals  more  properly  left  to 
private  interest  —  "Conservation"  —  Public  luxury  —  Appar- 
ently disproportionate  expense  of  public  celebrations  and  fes- 
tivals less  so  by  reason  of  its  multiple  character  —  Possible 
quasi-complementary  quality  of  public  luxury  —  Royalty  and 
nobility  as  surrogates  for  the  people  in  consumption  —  Then 
not  merely  selfish  —  Democratic  feeling  fatal  to  this  —  A  richer 
development  of  both  multiple  and  individually  enjoyed  utility 
in  prospect. 


CONTENTS  xvii 

CHAPTER  XVII.  THE  VARIATION  OF  UTILITY  IN  RE- 
LATION TO  CONSUMER'S  RENT,  INDIVIDUAL  AND 
SOCIAL 173 

Consumer's  rent  a  result  of  the  variation  of  utility  —  Why 
"rent"  rather  than  surplus  —  Not  measurable  La  money  — 
The  possible  transputed  utility  of  an  article  no  part  of  its  con- 
sumer's rent  —  Tendency  of  untransputed  complementary  util- 
ity to  escape  commercial  valuation  —  Unimputable  utility  also 
escapes  —  Definitions  of  consumer's  rent  in  its  various  aspects 

—  Relation  to  total  capacity  to  enjoy  —  Danger  of  unlimited 
acquisition. 

Expansion  of  income  in  relation  to  consumer's  rent  —  The  in- 
dividual's progress  into  civilization  —  Significance  of  the  stages 
as  also  representative  of  present  social  strata  —  External  re- 
straint upon  expenditure  wholesome  —  Place  of  existential  util- 
ity —  The  middle  situation  best  —  At  the  top  among  incomes 
are  the  vanities  of  adventitious  utility. 

The  average  income  of  society  —  Money  even  less  applicable 
to  the  measurement  of  social  than  of  individual  consumer's  rent 

—  Characteristic  wastes  and  economies  —  Adventitious  utility 
negative  —  Multiple  utility  positive  —  Abundance  with  equal- 
ity unfavorable  to  adventitious  and  favorable  to  multiple  util- 
ity —  Inequality  brings  the  opposite  effects  —  Importance  for 
consumption,  and  for  social  economy,  of  the  distribution  of 
wealth  —  The  greater  the  proportion  of  medium-sized  incomes, 
the  greater  are  utility  and  consumer's  rent  —  Utility  of  free 
tune  —  Economics  teaches  restraint  upon  individual  accumula- 
tion. 

CHAPTER  XVm.  OF  CERTAIN  PRACTICAL  APPLICA- 
TIONS   184 

The  practical  application  of  the  foregoing  theory  a  secondary 
consideration  —  Diminishing  utility  as  applied  to  the  accumu- 
lation of  riches  too  mild  a  statement  of  the  truth  —  "The  chief 
enjoyment  of  riches  consists  in  the  parade  of  riches  "  —  Sumptu- 
ary laws  useless  —  Philanthropy  —  Resulting  possibility  of 
inverse  selection  of  the  richest  —  Value  to  society  of  the  inher- 
itance of  property  —  Possible  modification  of  the  institution  in 
relation  to  the  justification  of  the  right  of  private  property  — 
Adventitious  ambitions  not  confined  to  the  rich  —  Waste  of 
possible  utility  in  a  different  way  at  the  other  end  of  the  social 
scale  —  Why  this  latter  situation  is  less  easily  disposed  of  — 
Futility  of  computing  the  economic  value  of  a  man  —  Democ- 
racy —  The  golden  mean. 


INTRODUCTION 

WELFARE  AND   UTILITY 

THE  title  of  this  essay, "  Welfare  as  an  Economic  Quantity," 
should  give  some  notion  of  the  interest  and  importance  of 
\  its  subject.  Welfare  comprehends  or  represents  all  things 
|  of  reasonable  and  rightful  desire.  Its  economic  foundations, 
it  is  true,  may  seem  less  interesting.  This  very  fact  is  pre- 
sumptive evidence  that  the  dependence  of  welfare  upon 
economic  conditions  has  not  received  the  attention  it  de- 
serves. Welfare,  or  a  large  part  of  welfare,  is,  in  mathemati-  , 
cal  parlance,  a  function  of  the  control  of  economic  goods.  ) 
In  other  words,  the  quantity  or  degree  of  welfare  depends 
in  large  measure  upon  economic  goods  and  upon  the  use 
made  of  them.  It  is  the  writer's  purpose  to  contribute 
something  toward  an  understanding  of  this  quantitative 
relation  between  goods  and  welfare. 

If  it  were  desirable  to  make  the  title  also  a  definition  of 
the  subject,  it  might  read,  "Kinds  of  Utility  and  their 
Variation."  This  is  technically  more  accurate,  but  also 
less  generally  intelligible  than  the  other.  Such  a  tech- 
nical label  does  not  do  justice  to  the  human  interest  of 
this  phase  of  the  study  of  economic  consumption. 

It  is  not  to  the  purpose  to  discuss  in  this  essay  the  nature 
and  essence  of  welfare.  It  suffices  to  make  explicit  the  as- 
sumption that  welfare  is  an  all-round  satisfactory  state  of 
being,  securely  grounded  in  material  and  economic  as  well 
as  other  elements.  The  idea  is  properly  associated  with 
that  of  a  sufficiency  of  economic  goods,  though  the  state 
is  not  thus  simply  constituted.!  Some  will  be  inclined  to 
beg  the  question  at  this  point,  chiefly  those  sheltered  ones 
who  do  not  know  what  it  is  to  do  without  any  necessary 


xx  INTRODUCTION 

or  convenience.  Any  one  who  believes  that  the  essence  of 
welfare  is  a  state  of  mystic  contemplation  or  something 
else  equally  ethereal  will  not  care  to  read  what  follows. 
Such  a  one  must  first  learn  something  of  the  elementary 
relations  between  life  and  work  with  which  economics 
deals. 

The  economic  term  "utility,"  rather  than  the  more 
general  and  popular  word  "  welfare,"  is  commonly  used  in 
the  following  pages  because  the  former  is  well  established 
in  the  terminology  of  economics  and  has  a  definite  special 
meaning.  The  relation  between  the  two  is  roughly  indi- 
cated by  considering  the  utility  of  anything  as  a  part  or 
element  of  that  of  which  welfare  is  the  whole.  Incidentally, 
the  concrete  utility  is  thought  of  more  objectively  as  in- 
hering hi  goods.  Welfare  is  collective  and  general  and  there- 
fore comparatively  abstract.  At  least  it  is  not  thought  of 
as  limited  by  persons  and  conditions.  But  utility  also  is 
general,  or  generalizable,  and  only  figuratively  the  "prop- 
erty" of  particular  goods.  We  do  speak  of  the  utility  of 
goods  and  of  the  welfare  of  men,  but  this  difference  of 
usage  may  be  merely  a  matter  of  viewpoint  and  emphasis. 

Welfare,  it  may  be  said,  is  properly  a  collective  term 
for  satisfactory  or  pleasant  states  of  mind  or  for  such  of 
these  as  are  duly  grounded  in  or  accordant  with  objective 
conditions,  and  thus  more  or  less  permanent.  Since  utility 
is  the  more  objective  counterpart  of  satisfaction,  it  would 
seem  that  welfare  is  a  sum  or  system,  not  of  utilities,  but  of 
the  corresponding  satisfactions.  In  other  words,  if  welfare 
is  subjective  and  utility  objective,  the  latter  cannot  be 
described  as  a  part  of  the  former.  In  fact,  however,  welfare 
is  not  thought  of  as  a  merely  psychical  state  or  subjective 
quantity,  nor  is  utility  thoroughly  and  completely  objec- 
tive. Perhaps  the  variable  and  seemingly  loose  use  of  these 
words  is  justified  by  the  parallelism  that  obtains,  in  a  more 
general  sense  than  is  technically  denoted,  between  the 
physical  and  the  psychical.  Where  capacity  is  so  variable 


INTRODUCTION  xxi 

and  conditional  a  matter  it  may  not  be  possible  strictly  to 
discriminate  between  the  capacity  to  satisfy  and  the  result 
of  the  manifestation  of  that  capacity. 

It  may  be  said,  even  by  those  who  acknowledge  the  in- 
terdependence of  the  two,  that  welfare  is  a  psychical  or 
subjective  quantity  and  not  an  economic  quantity.  Classi- 
fications emphasizing  exclusion,  however,  are  apt  to  mis- 
lead. Doubtless  welfare  is  primarily  psychical.  The  phrase 
"an  economic  quantity,"  moreover,  should  be  taken  in  a 
restrictive  sense,  leaving  some  elements  of  welfare  ad- 
mittedly not  economic.  For  the  rest  we  may  insist  that 
whatever  is  controlled  by  economic  means  and  regulated 
by  economic  motives  is  in  so  far  economic.  A  psychical 
quantity  is  often  in  this  sense  also  an  economic  quantity. 
Welfare  is  most  certainly  an  economic  matter,  though  not 
exclusively  such.  But  welfare  is  just  as  certainly  not  a 
commercial  matter.  That  is  a  much  smaller  circle  within 
the  general  field  of  the  economic.  Commerce  and  welfare 
do  not  have  so  direct  a  connection  in  practice  that  we  must 
inevitably  connect  them  in  thought,  though  economics  is 
concerned  with  both. 

Welfare  may  be  thought  of  as  either  primarily  individual 
lor  primarily  social.)  That  the  word  tends  to  connote  social- 
ity is  natural.  Society  is  a  multitude  of  individuals  the  well- 
being  of  each  of  whom  is  dependent  upon  that  of  the  others. 

\Utility  might  also  be  considered  a  social  phenomenon,  but 
in  the  study  of  utility  we  must  devote  most  attention  to 
the  concretely  conceived  good  or  collection  of  goods  as  over 
against  the  equally  concretely  conceived  individual  or 
group  of  individuals.  The  social  viewpoint  is  therefore 
naturally  pushed  forward  to  another  stage  of  thought.  It 
is  not  often  that  the  group  of  consumers  is  large  enough 
itself  to  constitute  a  society.  Multiple  utility,  to  be  dis- 
cussed later,  is  an  important  exception.  But  the  economist 

[  generally  leaves  the  final  stage  of  social  synthesis  to  others./ 
"Wealth"  and  "welfare"  are  correlated  with  each  other. 


xxii  INTRODUCTION 

There  is  a  direct,  though  not  a  simple,  quantitative  relation 
between  them.  As  a  supply  or  collection  of  goods,  that  is, 
wealth,  varies  in  quantity  or  content,  the  utility  of  the  goods 
to  their  possessor,  their  potency  for  welfare,  also  varies. 
The  changes  in  the  goods  may  be  either  quantitative  or 
qualitative.  The  correlated  variation  of  utility,  at  least  in 
so  far  as  economics  is  concerned,  will  be  quantitative  only. 
The  necessary  foundation  for  a  theory  of  economic  con- 
sumption would  seem  to  be  a  law  or  laws  of  this  quantita- 
tive variation  of  utility.  We  are  familiar  with  one  such 
law,  that  of  diminishing  utility.  But  economists  have  not 
paid  much  attention  to  this  as  a  phase  of  economic  con- 
sumption. \They  have  immediately  put  the  principle  to 
ulterior  use  for  the  explanation  of  value  and  of  market 
transactions;  hence  they  have  failed  to  give  any  adequate 
account  of  the  variation  of  utility  as  suclu}  It  is  the  chief 
purpose  of  this  essay  to  develop  a  more 'comprehensive 

\  theory  X^ 

There  are  different  kinds  of  utility  and  the  type  of  varia- 
tion is  not  the  same  for  all.  These  kinds  of  utility  have 
scientific  interest  and  social  significance  apart  from  the 
character  of  their  variation.  Yet  we  can  scarcely  say  that 
anything  important  about  utility  is  quite  unconnected  with 
its  quantitative  variation.  That  which  is  socially  signifi- 
cant in  the  field  of  consumption  must  be  so  in  relation  to 
social  economy.  "Social  economy"  here  means  the  good 
management  of  the  material  and  other  means  of  satisfac- 
tion. The  clue  to  good  management  in  consumption  lies 
in  the  relations  between  quantity  of  goods  and  quantity 

i    (or  degree)  of  satisfaction  —  in  just  this  problem  which  is 
to  be  solved  by  the  formulation  and  application  of  the 

1  If  circumstances  favor  the  writer's  further  study  of  economic  con- 
sumption, the  related  topic  next  attempted  will  be  personal  services. 
This  should  include  some  consideration  of  the  general  bearings  of  the  dis- 
tinction between  derivative  and  original  income,  as  well  as  a  discussion 
of  the  character  and  the  social  reactions  of  this  class  of  immediate  utili- 
ties. The  scope  of  the  present  study  is  intentionally  restricted. 


INTRODUCTION  xxiii 

principles  of  the  variation  of  utility.  In  this  direction,  for 
example,  lies  the  answer  to  the  question  as  to  the  effect 
increased  concentration  of  wealth  may  be  expected  to  have 
upon  utility  and  welfare. 

That  welfare  is  exclusively  dependent  on  economic  fac- 
tors is  a  proposition  scarcely  to  be  maintained  except  in  a 
partisan  spirit.  But  it  is  possible  to  be  equally  dogmatic 
and  a  good  deal  more  vague  in  maintaining  the  extreme 
opposition  of  the  "materialistic  view"  of  history  and  life. 
The  moralists  have  not  often  conceded  to  the  economists 
all  that  belongs  to  them  in  the  field  of  the  study  of  welfare, 
perhaps  because  the  economists  have  themselves  usually 
been  inclined  to  claim  too  little  here.  The  latter  have  been 
too  anxious  to  steer  clear  of  moral  problems.  Though  wel-  \ 
fare  is  not  dependent  exclusively  on  economic  factors,  it 
is,  let  it  be  repeated,  a  matter  of  economics  as  well  as  of 
ethics.  That  the  subject  is  difficult  is  no  reason  why  the 
economists  should  surrender  it  entirely  to  the  moralist. 
The  economist  should  follow  his  clues  wherever  they  lead. 

The  argument  of  this  essay  does  not  turn  aside  when  it 
encounters  a  problem  in  morals,  but,  on  the  other  hand, 
neither  does  it  attempt  to  pass  judgment.  It  is  intended  to 
be  merely  a  contribution  to  economic  science.  If  it  also  has 
bearings  on  practical  problems,  so  much  the  better.  But 
such  practical  bearings  are  quite  incidental  to  its  main 
purpose.  The  writer,  however,  would  not  appear  to  hesi- 
tate to  draw  any  legitimate  conclusions  that  follow  from  the 
explanatory  principles  discussed.  He  does  not  suppose  that, 
because  his  purpose  is  to  explain,  and  not  to  justify  or  to 
rectify,  he  can  therefore  avoid  moral  issues.  But  he  does 
not  undertake  to  deal  with  them  in  the  completeness  neces- 
sary for  full  moral  judgment.  To  do  this  it  would  be  neces- 
sary to  take  into  consideration  facts  lying  beyond  the  scope 
of  economic  study.  Economics  cannot  claim  to  see  all  things 
whole.  I  If  ethics  comprehends  knowledge  of  root  and  all, 
and  if  it  may  thus  claim  to  be  entitled  to  judge  finally,  then  ! 


xxiv  INTRODUCTION 

^ts  students  ought  to  pay  more  attention  to  economics  than 
they  have  done  hitherto. 

Of  the  following  chapters  it  is  unfortunately  true  that 
the  earlier  ones  are  the  most  abstract.  They  will,  therefore, 
be  the  least  interesting  to  most  readers,  and  they  are  also 
the  least  significant.  Chapters  i  and  n  are  almost  exclu- 
sively occupied  with  the  ungrateful  task  of  defining  and 
of  qualifying  definitions.  Chapters  in,  iv,  and  vi  deal  with 
diminishing  utility.  This  subject  has  become,  as  regards  its 
fundamentals,  a  commonplace  of  economic  analysis.  But 
these  chapters  do  not  dwell  upon  the  commonplace  phases 
of  diminishing  utility  and  are  indeed  developed  to  a  degree 
of  abstraction  for  which  the  principle  excuse  is  that  they 
thus  serve  better  as  a  counterpart  for  what  follows.  The 
conception  of  the  nature  of  saving  which  is  incidentally 
developed  in  chapter  v  is  of  some  independent  interest. 
The  three  chapters  on  complementary  utility,  that  is, 
chapters  vn,  vin,  and  ix,  not  only  correct  the  ordinary 
conception  of  the  variation  of  utility  as  simply  diminishing 
as  the  supply  of  goods  increases,  but  also  come  fairly  close 
to  the  concrete  facts  of  life  and  enjoyment.  JThe  next  chap- 
ters, x,  xi,  and  xn,  deal  with  transputation  and  present  the 
darker  aspect  of  the  interdependence  of  goods  upon  one 
another.  If  the  transputation  of  utility  smacks  of  pessi- 
mism, the  theory  of  adventitious  utility,  set  forth  in  chap- 
ters xin,  xiv,  and  xv,  might  well  serve  as  a  school  of  cyni- 
cism. Chapter  xvi  deals  with  an  especially  social,  some 
would  loosely  say  "socialistic,"  phase  of  consumption  and 
enjoyment;  Chapter  xvn  attempts  to  gather  into  one  whole 
the  results  of  the  different  sorts  of  variation  of  the  sub- 
jective effectiveness  of  goods  for  social  welfare.  The  con- 
cluding chapter,  numbered  xvin,  draws  the  moral.  But 
such  practical  application  is  merely  an  incidental  function 
of  a  scientific  essay,  though  it  is  of  course  more  interesting 
than  abstract  explanation.  These  practical  conclusions  are 
only  briefly  touched  upon,  not  fully  discussed. 


INTRODUCTION  xxv 

It  is  the  fate  of  the  student  of  the  social  sciences  to  be 
abstract  even  where  he  is  least  willing  to  be  and  where  he 
may  perhaps  be  inclined  to  ignore  the  fact  that  he  is  so. 
The  writer  has  preferred  to  let  his  abstractness  be  explicit. 
One  general  assumption,  however,  may  well  be  here  dis- 
posed of  once  for  all.  The  variation  of  utility  and  the  wel- 
fare of  the  consumer  doubtless  depend  quite  as  much  upon 
^the  consumer  as  upon  the  goods  he  consumes.  And  the 
consumer  is  a  creature  of  volition.  We  therefore  have  to 
assume  that  he  is  on  the  average  somewhat  reasonable  in 
his  choices  if  we  are  to  derive  general  principles  determining 
the  variation  of  utility  and  the  relation  of  goods  to  welfare. 
We  assume,  in  other  words,  that  the  painter's  pigments 
must  be  "mixed  with  brains"  in  order  to  obtain  the  effects 
desired  and  expected.  This  essay  does  not  undertake  to 
discuss  the  quality  of  men,  though  it  is  granted  that  there 
is  nothing  of  greater  importance  in  relation  to  the  effective- 
ness of  material  as  well  as  of  immaterial  means  of  welfare. 
The  argument  assumes  a  tolerably  good  average  level  of 
intelligence  and  self-control.  In  thus  leaving  to  one  side 
questions  as  to  the  quality  and  variability  of  human  nature, 
the  part  exhibits  the  character  of  the  whole.  Economics 
is  not  a  comprehensive  science  of  human  nature  and  social 
relations  but  an  abstract  study  of  a  certain  class  of  individ- 
ual acts  and  correlated  social  phenomena.  The  study  of 
economic  consumption  will  naturally  avail  itself  of  the 
same  prerogative  of  being  abstract. 


WELFARE  AS  AN  ECONOMIC 
QUANTITY 

CHAPTER  I 

UTILITY    DEFINED 

ECONOMICS  is  the  study  of  the  means  of  welfare,  that  is, 
of  goods  and  services,  or  of  things  and  processes  having 
utility.  Whether  utility  be  considered  cause  or  component 
of  welfare  is  a  question  that  need  not  be  settled  here.  An 
increase  of  utility  normally  contributes  to  welfare.  For 
reasonable  beings  the  more  utility  there  is  available,  the 
greater  is  welfare.  The  detailed  relation  between  these  two 
variants  is  the  subject-matter  of  the  portion  of  economics 
that  deals  with  consumption.  The  corresponding  relation 
between  utility  and  its  physical  conditions  and  causes, 
similarly  considered  as  variants  subject  to  control,  con- 
stitutes the  field  of  economic  production,  including  the 
creation  of  place-  and  time-utilities  as  well  as  element- 
and  form-utilities.  Thus  viewed,  the  study  of  consumption 
is  chiefly  concerned  with  utility  and  its  variation.  The 
first  step  in  such  a  study  is  the  definition  of  utility. 

Utility  may  be  defined  as  the  capacity  in  greater  or  less 
degree  to  satisfy  wantsj  It  is  a  favorable  or  desirable  re- 
lation of  an  external  thing  or  its  processes  to  pleasant  or 
agreeable  states  of  mind.  1  The  student  of  economics  does 
not  need  to  be  told  that  the  agreeable  and  the  ornamental  \ 
possess  utility  quite  as  truly  as  does  the  "useful."  Things 
having  utility  constitute  as  miscellaneous  a  class  of  impor- 
tant and  trivial  objects  as  can  well  be  conceived.  A  child's 
lollipop,  a  paved  public  street,  a  splinter  of  the  "true 


2         WELFARE  AS  AN  ECONOMIC  QUANTITY 

cross,"  a  sturdy  sunflower,  the  Koh-i-noor  diamond,  a  glass 
of  lemonade,  green  and  red-flowered  wall-paper,  a  hot  bun, 
a  graduation  diploma,  a  waft  of  perfume,  all  these  yield 
satisfaction  and  are  included  among  the  things  having  util- 
ity. ^Peculiarities  and  limitations  of  this  conception  of  util- 
\  ity  will  appear  in  the  course  of  our  examination  of  its  kinds. 
r    The  term  utility  is  also  used  to  designate  the  qualities 
i  by  reason  of  the  possession  of  which  certain  concrete  things 
1  and  acts  are  constituted  goods  and  services. }  But  utility  is 
predicated  of  a  good  or  of  a  service  only  in  relation  to 
human  wants  and  satisfactions,  though  the  latter  may  be 
several  degrees  removed  from  the  primary  uses  of  the 
object.    A  good  is  said  to  have  this  or  that  utility  with  ref- 
erence to  the  wants  of  some  more  or  less  definite  person  or 
persons.  'The  relation  to  the  psychical  or  the  subjective 
is  essential  to  the  nature  of  utility.  \ 

It  might  better  be  said  that  a  good  has  so  much  utility. 
;For  utility  is  always  thought  of  quantitatively.)  There  is 
{always  present  at  least  an  implied  or  latent  quantitative 
/comparison  with  the  utility  of  other  goods.  "More"  or 
"  less  "  is  the  essence  of  quantitative  judgment.  This  sort  of 
comparison  will  be  made  where  there  can  be  no  absolute 
and  definite  determination  of  quantity. 

When  reference  is  made  to  the  utility  of  a  good,  the 
speaker  may  possibly  more  or  less  consciously  limit  his 
conception  to  some  one  particular  use,  presumably  the  most 
appropriate  use  to  which  the  good  may  be  put.  If  one  use 
is  exclusive  of  any  other  and  is  exhaustive  of  the  good's 
power  to  satisfy,  such  limitation  is  inevitable.  A  plate  of 
hot  baked  beans  serves  only  one  purpose  and  can  be  used 
only  once.  The  utility  of  a  chair  is  different.  It  may  be 
used  by  several  persons  in  turn.  Its  utility  is  therefore  a 
multiple  of  the  advantages  obtained  from  it  by  one  sitter. 
But  that  is  not  all.  Not  to  speak  of  the  various  more  or  less 
reclining  postures  which  the  body  may  assume  in  a  chair, 
it  may  be  found  convenient  occasionally  to  use  the  chair  to 


UTILITY  DEFINED  3 

stand  on  in  order  to  get  something  otherwise  out  of  reach. 
The  family  ironing  may  be  done  on  a  board  resting  more  or 
less  securely  on  the  backs  of  two  chairs.  It  is  perhaps  en- 
tirely defensible  for  some  purposes  to  think  of  the  utility 
of  a  chair  abstractly  as  proportionate  only  to  the  satisfac- 
tion to  be  derived  from  its  primary  use  for  sitting.  But  the 
posture  for  which  the  chair  is  built  is  a  merely  physical 
matter.  Such  a  basis  would  scarcely  seem  to  be  the  best 
one  for  the  delimitation  of  a  good's  utility  as  contrasted 
with  the  definition  of  the  good  itself,  the  good  being  merely 
physical  while  the  utility  is  a  psychical  fact.  If  we  pass  on 
to  the  viewpoint  of  the  less  external  condition  of  satisfac- 
tion, we  find  the  sitting  posture  itself  has  a  great  variety  of 
uses.  After  eating  one  may  sit  in  order  the  better  to  digest 
one's  dinner.  One  may  sit  in  order  to  write  conveniently 
at  a  table.  One  may  sit  in  order  to  rest  one's  feet  and  legs 
by  distributing  one's  weight  over  a  greater  surface.  To  use 
the  chair  to  increase  one's  available  height  is  but  a  step 
farther  away  from  its  physical  design.  It  is  thus  most 
natural  to  think  of  the  utility  of  a  chair  in  a  collective  sense, 
as  incorporating  the  potential  benefits  of  all  the  various 
uses  to  which  it  may  possibly  or  reasonably  be  put.  Is  some 
single  one  of  the  multifarious  uses  to  which  a  boy's  jack- 
knife  is  put  the  correct  index  of  its  utility?  The  use  of  a 
needle  as  a  surgical  instrument  or  of  a  bent  pin  for  fishing 
may  sometimes  prove  to  afford  no  small  contribution  to 
utility.  Indeed  utility  is  ordinarily  collective^  Throughout 
this  essay,  unless  otherwise  indicated,  the  word  is  employed 
in  this  collective  sense.  If  the  consumer  can  add  to  or ; 
\better  the  conventional  and  accepted  uses  of  a  good,  he 
thereby  increases  for  himself  its  utility.1 

1  The  Austrians  think  of  varied  possibilities  of  use  as  alternative  and 
I  exclusive  instead  of  supplementary.  Cf .  Bohm-Bawerk,  Positive  Theory 
I  of  Capital  (translation),  1891,  book  in,  chap.  viz.  But  in  the  case  of  most 
\  durable  goods  the  uses  are  actually  in  the  main  supplementary  to  one 
{  another,  not  exclusive.  It  is  only  f^r  r»rocessive  uses  (cf .  chap,  v,  below) 
\  that  the  other  view  holds. 


4         WELFARE  AS  AN  ECONOMIC  QUANTITY 

A  particular  species  of  utility,  thought  of  as  characteris- 
tic of  some  one  kind  of  good,  is  likewise  potentially  collective, 
even  though  the  species  itself  be  so  narrow  as  ordinarily 
to  refer  to  but  one  use  of  the  good.  The  rest-giving  utility 
of  chairs,  the  warmth-preserving  quality  of  bed-blankets, 
the  "soporific  virtue"  of  opiates,  all  seem  narrowly  limited, 
yet  each  is  collective  of  various  possible  uses.  The  lounger's 
"pipe  dreams"  and  the  convalescent's  recovery  of  health 
are  not  closely  related,  but  the  same  chair  may  be  the  in- 
strument of  both.  Though  a  highly  specialized  civilization 
makes  us  ignorant  of  many  of  the  possibilities  of  a  tin  can, 
it  may  be  put  to  many  other  uses  besides  that  of  a  water- 
tight or  air-tight  package.  Even  its  uses  as  a  mere  con- 
tainer are  multifarious. 

There  is  a  species  of  utility  which,  because  it  is  so 
thoroughly  psychical  in  its  nature,  is  narrow  enough 
to  refer  to  only  one  kind  of  use,  though  one  to  which 
almost  any  sort  of  good  may  be  put.  This  distinctive 
and  subjective  species  is  adventitious  utility,  to  the  con- 
sideration of  which  several  of  the  following  chapters  are 
devoted. 

"A  utility"  is  often  spoken  of  as  equivalent  to  what  we 
;  have  called  a  use.  In  this  sense  the  utility  of  a  good  is  the 
algebraic  sum  of  its  practicable  "utilities,"  in  so  far  as  they 
do  not  interfere  with  each  other.  Where  two  uses  are  exclu- 
sive of  each  other,  as  in  the  case  of  alcohol  to  be  used  either 
medicinally  or  for  combustion,  the  preferred  alternative 
use  is  the  one  to  be  included. 

Although,  owing  to  the  tendency  to  differentiation  and 
specialization  in  any  considerable  stock  of  goods,  auxiliary 
uses  are  ordinarily  of  little  account,  the  purchaser  never- 
theless judges  a  good  synthetically,  that  is,  with  reference 
to  all  the  uses  to  which  he  may  care  to  put  it./  The  skill  of 
the  retailer  consists  largely  in  calling  to  the  buyer's  atten- 
tion the  auxiliary  utilities  which  the  latter  is  getting,  or  in 
concealing  auxiliary  disutilities,  until  the  sum  of  positive  j 


UTILITY  DEFINED  5 

N\  utility  appears  to  the  buyer  to  mount  well  above  the  margin, 
and  so  the  purchase  is  made. 

As  above  remarked,  if  the  consumer  can  add  to  or  better 
the  conventional  and  accepted  uses  of  a  good,  he  thereby 
increases  its  utility.  The  discovery  of  such  different  and 
new  uses  is  one  of  the  great  progressive  factors  in  consump- 
tion. It  is  much  more  important  than  the  refinement  of 
sensibilities  that  makes  the  connoisseur.  The  latter's  con- 
sciousness of  scarcely  perceptible  differences  has  the  same 
sort  of  relation  to  wholesomeness  and  progress  in  consump- 
tion that  the  development  of  athletic  contests  has  to  health 
and  eugenesis  among  the  people,  the  correlation,  so  far  as 
there  is  positive  correlation,  being  in  both  cases  quite 
indirect. 

Since  it  is  chiefly  the  quantitative  aspect  of  utility  with 
which  we  are  to  deal,  we  cannot  well  stop  at  a  qualitative 
definition.  We  must  have  a  measure  of  utility,  at  least  for 
the  purposes  of  our  thought. 

/Tn  the  writer's  conception,  utility  is  proportioned  to 
f  satisfaction. !  The  utility  of  a  good  or  supply  is  propor- 
tioned to  the  sum  of  satisfaction  obtainable  from  the 
different  uses  to  which  it  will  be  put./  This  proposition, 
however,  is  not  to  be  taken  without  qualification.  There 
are  things  which  will  be  accepted  in  lieu  of  satisfaction, 
certain  peculiar  kinds  of  utility  being  thus  constituted. 
From  this  broader  viewpoint,  therefore,  contribution  to 
satisfaction  or  what  will  be  accepted  in  lieu  of  such  contri- 
bution, is  the  conceptual  measure  of  utility. 
/  The  proposition  that  quantity  of  utility  is  equal  to  quan- 
j  tity  of  satisfaction  requires  only  such  qualification  as  re- 
sults from  the  generalized  nature  of  utility.1  Satisfaction 
jthat  is  due  to  the  idiosyncrasy  of  some  one  individual  is, 
of  course,  not  a  sufficient  foundation  for  a  corresponding 

1  Substantially  the  point  made  by  Seligman,  article  on  "Social  Ele- 
'    ments  in  the  Theory  of  Value,"  Quarterly  Journal  of  Economics,  vol.  xv. 
1900-01,  p.  321. 


6    WELFARE  AS  AN  ECONOMIC  QUANTITY 

quantity  of  utility.  The  satisfaction  must  be  susceptible 
of  being  experienced  by  others.  Only  so  could  utility  be 
subject-matter  for  a  social  science. 

The  generalized  character  of  this  satisfaction  suggests  the 
solution  of  another  troublesome  question;  Is  utility  in  pro\ 
portion  to  experienced  or  realized  satisfaction  or  to  adjudged  \ 
or  expected  satisfaction?  It  is,  of  course,  in  individual  cases 
far  from  being  exactly  in  proportion  to  either.  It  is  in  pro-  / 
portion  to  reasonably  expected  satisfaction.  But  such 
expectation  is  substantially  identical  with  what  has,  in 
general,  been  experienced,  and  thus  with  what  will,  in  gen- 
eral, be  experienced.  Barring  accidents,  and  possibly  al- 
lowing for  the  approximate  nature  of  human  notions  of 
quantity,  generalizable  experience  and  reasonable  ex- 
pectation are  the  same.  Utility  is  fundamentally  a  relation^ 
of  goods  to  satisfaction,  but,  as  a  quantity,  it  is  also  inci-/ 
dentally  a  judgment  of  that  relation. 

There  is  to  be  observed  an  occasional  inclination  to 
confuse  utility  and  subjective  value,  with  a  resulting  ten- 
dency to  perceive  only  such  utility  as  is  proportioned  to 
marginal  satisfaction,  that  is,  the  satisfaction  afforded  by 
the  least  esteemed  use  to  which  any  portion  of  the  supply 
of  a  commodity  will  be  put.1  This  goes  against  many  ob- 

1  The  reference  is  especially  to  F.  A.  Fetter,  Principles  of  Economics, 
ji  /  p.  26,  as  follows:  "' Total  utility'  ...  if  it  has  any  existence,  certainly 
cannot  be  calculated.  The  diagram  showing  the  curve  of  diminishing 
utility  must  be  understood  as  representing  indicatively  at  any  given  mo- 
ment but  one  marginal  utility,  the  same  for  every  unit  of  like  goods.  The 
other  perpendicular  lines  are  expressed  in  the  conditional  mood;  they  are 
what  the  marginal  utility  would  be  were  the  numbers  of  units  different." 

Contrast  this  with  Jevons,  Theory  of  Political  Economy,  2d  ed.,  p.  56: 
"We  may  know  the  degree  of  utility  at  any  point  while  ignorant  of  the 
total  utility,  that  is,  the  area  of  the  whole  curve.  To  be  able  to  estimate 
the  total  enjoyment  of  a  person  would  be  an  interesting  thing,  but  it 
would  not  be  really  so  important  as  to  be  able  to  estimate  the  additions 
and  subtractions  to  his  enjoyment  which  circumstances  occasion."  On 
p.  87,  Jevons  identifies  value  in  use  with  total  utility.  This  would  not  be 
inconsistent  with  the  employment  of  the  term  in  a  representative  sense 
in  relation  to  a  single  article,  in  fact  as  synonymous  with  utility. 


UTILITY  DEFINED  7 

vious  facts.  Some  articles  of  consumption  —  for  example,  a 
piece  of  furniture  such  as  a  piano  or  a  cook  stove,  of  which 
a  family  ordinarily  possesses  only  one  instead  of  having  a 
supply  of  several  similar  units  —  commonly  have  utility 
clearly  greater  than  their  value.1  On  the  other  hand,  if, 
under  certain  conditions  of  supply,  the  least  important  use 
to  which  a  good  will  be  put  has  no  appreciable  positive 
utility,  but  is  merely  the  care-free  wasting  of  it,  such  a  good's 
marginal  utility  is  nil.  But  goods  without  marginal  utility 
are  not  therefore  divested  of  all  utility,  else  we  must  deny 
that  such  goods,  which  are  free  goods  by  reason  of  the 

j  abundance  of  their  supply  having  given  them  a  zero  mar- 
ity,  are  goods.2  But  to  be  a  good  and  to  have  util- 
ity are  coextensive  propositions.  Things  having  marginal 
utility  constitute  a  less  extensive,  included  class.  Similarly 
the  marginal  utility  pertaining  to  the  individual  good  thing 
may  easily  be  much  less  than  the  whole  utility  of  the  ar- 
ticle in  question.  Moreover,  if  we  must  confine  our  thought 

;  to  marginal  utility,  or  to  the  utility  corresponding  to  that 

1  Wieser,  Natural  Value,  book  i,  chap,  vin,  discusses  what  appears  to 
be  a  similar  case,  but  a  closer  examination  shows  that  he  is  treating  of 
the  economic  value  (not  the  utility)  of  goods  that  are  dealt  in  as  indivisible 
wholes,  not  those  that  are  such  for  purposes  of  consumption  only. 

1 2  Menger,  Grundsatze  der  Volkswirtschaftslehre,  1871,  p.  83,  says: 
"Die  nicht  b'konomischen  Guter  haben  demnach  nicht  nur  keinen 
Tauschwerth,  sondern  iiberhaupt  keinen  Werth,  und  somit  auch  keinen 
Gebrauchswerth.  .  .  .  Der  Tauschwerth  sowohl  als  der  Gebrauchswerth 
zwei  dem  allgemeinen  Begriffe  des  Werthes  subordinate,  also  in  ihrem 
Verhaltnisse  zu  einander  coordinirte  Begriffe  sind,  und  demnach  Alles 
das,  was  wir  vom  Werthe  im  Allgemeinen  sagten,  eben  sowohl  vom  Ge- 
brauchswerthe  als  vom  Tauschwerthe  gilt"  But  it  is  evident  that 
Gebrauchswerth  is  not  here  used  as  the  equivalent  of  Adam  Smith's 
"  value  in  use." 

The  formally  logical  phrasing  of  the  passage  from  Menger  is  not  con- 
vincing, since  it  does  not  reckon  with  the  fact  that  value  is  a  very  broad 
genus,  of  which  economic  value,  whether  exchange  value  or  subjective 
economic  value,  is  but  a  species.  To  say  that  water,  or  that  a  pail  of  water 
just  drawn  to  sprinkle  one's  flower  bed,  has  no  value  in  use,  because  one 
can  get  water,  or  another  pail  of  water,  for  the  trouble  of  turning  a  faucet, 
seems  to  the  writer  contrary  to  the  sense  of  the  English  words  and  con- 
trary to  common  sense. 


8         WELFARE  AS  AN  ECONOMIC  QUANTITY 

which  results  from  the  least  important  reasonable  use  or 
set  of  uses  for  any  unit  of  the  available  supply,  we  deprive 
ourselves  of  any  standard  of  comparison  not  varying  ar- 
bitrarily with  the  pecuniary  means  of  individuals,  since 
available  supply  varies  with  purchasing  power.  The  mar- 
ginal utility  of  a  pair  of  shoes  or  of  a  pound  of  candy  varies 
from  individual  to  individual  as  much  as  does  the  utility  of 
a  dollar.  But  the  utility  of  shoes  as  such  or  of  candy  does 
not  so  greatly  vary,  because  the  satisfaction  they  afford, 
aside  from  idiosyncrasies  of  taste,  varies  comparatively 
(jtittle. 

This  proposition  as  to  the  feeling  equality  of  different 
individuals  requires  explanation  and  delimitation.  Doubt- 
less sensibility,  as  evidenced  by  central  feeling  or  affection, 
as  well  as  with  reference  to  pain  stimuli,  varies  greatly  from 
human  individual  to  human  individual.  Therefore,  it 
would  be  well  to  compare  the  feeling  experiences  of  two 
individuals  by  reference  to  the  relative  position  or  rank  of 
the  feelings  rather  than  in  terms  of  measurement  units. 
Probably  we  should  never  attempt  to  assign  absolute  values 
to  the  degrees  of  feeling  of  different  individuals.  But 
whether  this  holds  or  not,  it  greatly  simplifies  comparison 
to  assume  that  the  correct  method  is  to  equate  the  zero- 
mean  or  point  of  indifference  of  one  individual's  scale  with 
the  similar  zero-mean  of  a  different  individual,  other  points 
being  compared  by  way  of  relative  distance  from  such 
means.1  The  proposition  above  enunciated  supposes  merely 
that  the  satisfactions  of  different  individuals  should  be  thus 
compared  according  to  relative  position,  that  is,  as  first, 
second,  third,  etc.,  or  in  a  percentile  scale.2 

Just  wherein  and  why  the  higher  ranges  of  the  utility 
curve  are  peculiar  and  are  intractable  to  current  conceptions 
is  considered  in  chapter  xi,  below,  on  the  transputed  char- 
acter of  the  initial  utility  of  necessaries,  and,  though  less 

1  This  question  comes  up  again  at  p.  176. 

2  Or  by  way  of  the  terms  of  a  binomial  expansion. 


;  UTILITY  DEFINED  9 

directly,  also  in  chapter  xiv,  on  the  economic  status  of 
adventitious  utility. 

The  absence  of  definite  allocation  of  the  utility  that  is 
in  excess  of  marginal  utility  to  one  or  more  specific  units 
of  the  supply  causes  such  utility  to  be  often  ignored  and 
sometimes  entirely  neglected  by  economists.  We  shall 
later  see  that  the  utility  due  to  the  suitable  grouping 
of  articles  of  consumption  is  little  regarded  for  the  same 
reason,  because  this  species  of  utility  also  is  not  clearly 
and  certainly  the  property  of  one  concrete  and  definite 
good.  But  these  utilities  exist,  whether  amenable  to  com- 
mercial valuation  or  not.  If  a  particular  supply  is  reduced 
1  to  a  single  unit,  its  utility  clearly  need  not  be  merely  mar- 
ginal for  its  possessor.  It  often  is  much  greater  than  what 
corresponds  to  the  price  he  would  have  to  pay  for  it.  Yet 
the  fact  that  there  are  several  units  can  scarcely  be  sup- 
posed to  destroy  whatever  is  in  excess  of  the  marginal  ele- 
ment in  the  utility.  Super-marginal  utility  remains  utility, 
and  is  often  the  most  fruitful  or  effective  part  of  utility.1 

1  Having  in  view  the  essential  character  of  the  phenomena  of  utility, 
one  would  rightly  expect  that  "effective"  utility  would  mean  utility  that 
is  effective  for  satisfaction.  But  in  his  Essentials  of  Economic  Theory,  p. 
7,  Professor  Clark  makes  "effective  utility"  mean  utility  that  is  effective 
for  the  determination  of  economic  value.  The  analogy  of  "effective 
demand"  explains  this.  But  utility  looks  to  satisfaction,  not,  as  does 
demand,  to  the  market.  But,  as  is  here  curiously  illustrated,  the  atten- 
tion of  economists  is  not  easily  attracted  in  that  direction. 


CHAPTER  II 

THE    SPECIES    OF    UTILITY 

THE  character  of  utility  partakes  of  both  the  objective  and 
the  subjective.  Hence  it  does  not  appear  at  first  glance 
whether  it  can  be  subdivided  into  species.  Objects  and 
events  that  have  utility  are  multifarious.  Subjective 
satisfaction,  on  the  other  hand,  is  of  homogeneous  sub- 
stance. It  is  doubtful  if  we  can  at  all  divide  and  classify 
satisfaction  as  such.  But  we  can  deal  with  sources  of  satis- 
faction with  reference  to  psychical  effects  as  well  as  with 
reference  to  physical  qualities,  and  therefore  we  can  divide 
or  classify  utility.  Though  satisfaction  is  one,  relations  to 
it,  or  the  sides  from  which  it  can  be  approached,  are  many. 
The  same  substance  may  be  cut  into  many  different  sizes 
and  shapes. 

There  may  be  several  classifications  of  the  same  group 
of  things,  all  quite  "natural"  or  organic  in  character.  Thus 
utility  is  susceptible  of  more  than  one  significant  division. 
Some  familiar  ones  are  as  follows:  — 

Utility  is  positive  or  negative.    Negative  utility  is  the 
tendency  to  cause  detriment  or  to  detract  from  enjoyment 
and  is  usually  distinguished  as  "disutility.  >' 
!„  Utility  is  marginal,  super-marginal,  or  free  —  ideas  to 
which  the  reader  has  already  been  introduced.    The  first 
is  the  utility  corresponding  to  the  least  important  reason- 
able use  or  set  of  uses  for  a  unit  good  under  given  conditions 
/  of  supply.  Wants  remaining  constant,  any  unit  of  a  given 
supply  has  the  same  degree  of  marginal  utility  as  any 
other  unit. 

Some  units,  though  their  physical  identity  cannot  be 
fixed,  have  more  than  this  degree  of  utility.  The  excess  is 


THE  SPECIES  OF  UTILITY  ;  11 

super-marginal  utility.'  If  we  wish  to  distinguish  other 
than  marginal  units  of  the  supply  as  intra-marginal,  then 
intra-marginal  utility  would  be  the  utility  individually 
and  collectively  possessed  by  these  units.  The  amount  or 
degree  of  utility  possessed  by  one  or  more  of  such  units  in 
\  excess  of  that  of  the  marginal  unit  is  super-marginal 
utility. 

Free  utility  is  the  utility  of  free  goods,  which  are  those 
whose  supply  is  so  abundant  relatively  to  wants  that 
/their  marginal  utility  is  zero./  It  might  be  considered  a 
special  case  of  super-marginal  utility,  that  is,  the  case 
where  marginal  utility  is  zero,  but  the  fact  that  the  one 
relates  to  economic  and  the  other  to  free  goods  makes  it 
important  to  have  separate  and  distinct  terms. 

Utility  is  direct  or  indirect  according  to  whether  the 
/  good's  capacity  to  satisfy  is  ripe  and  ready  or  "whether  the 
good  is  appreciated  as  a  means  to  the  creation  of  other  ob- 
ijective  conditions  of  satisfaction  rather  than  for  itself. 
Coal  can  directly  affect  one's  enjoyment  negatively  by  soil- 
ing things,  indirectly  and  positively  by  being  used  to  create 
warmth.  The  utility  of  the  same  object  may  be  more  indi- 
rect or  less  indirect,  according  to  its  destined  use;  the  coal, 
for  example,  according  to  whether  it  is  used  as  domestic 
fuel  or  as  the  source  of  power  for  a  mill.  The  same  distinc- 
tion is  often  indicated  by  the  words  immediate  and  medi- 
ate or  intermediate.  These  classes  of  goods  are  also  dis- 
tinguished as  of  first  order  and  of  higher  or  remoter  orders.1 
An  especially  important  phase  of  this  distinction  relates  to 
the  possibility  of  exchange,  by  way  of  which  a  good  has  an 
indirect  utility  corresponding  to  what  it  will  fetch  in  ex- 
change for  money  or  other  goods.2j 
,  The  above  are  of  course  cross-classifications  or  sub- 

1  Menger,  Grundsatze,  p.  8. 

2  Jevons  (Theory  of  Political  Economy,  2d  ed.,  p.  76)  would  confine 
"indirect"  to  this  sense  and  relate  "mediate"  utility  to  the  stages  of  the 
productive  process.   But  it  is  doubtful  if  such  a  distinction  can  be  es- 
tablished as  usage,  even  as  technical  usage. 


12       WELFARE  AS  AN  ECONOMIC  QUANTITY 

classifications,  each  of  great  value  for  particular  purposes. 
Below  are  introduced  certain  further  classifications  which 
are  as  important  as  those  just  mentioned.  It  will  be  nec- 
essary, incidentally,  to  use  and  to  define  certain  new  terms. 
It  would  be  well  for  the  reader  to  bear  in  mind  the  fact 
that  the  definitions  which  take  up  the  remainder  of  this 
chapter  serve  chiefly  to  introduce  certain  concepts  to  the 
understanding,  whose  significance  can  be  fully  appreciated 
only  after  reading  the  chapters  to  follow. 
f  The  consumption  of  a  good  may  be  related  to  the  satis- 
•  faction  of  wants  in  a  threefold  way.  The  good  may  possess 
qualities  which  are  wanted  for  themselves.  The  relation  is 
then  simple  and  direct  between  the  qualities  of  the  good 
and  the  wants  of  its  consumers.  But  the  relation  may  be 
of  a  more  complicated  sort,  not  adequately  accounted  for 
in  this  manner.  -The  good  may  be  wanted  for  the  sake  of 
conjoint  consumption  with  some  other  good.  So  far  as  this 
holds,  the  relation  of  the  good  to  another  good  is  the  critical 
factor  in  its  utility  and  value.  Of  course  the  relation  to 
wants  continues  to  be  fundamental;  but  it  is  overshadowed 
in  the  case  of  the  part  of  the  utility  that  depends  on  joint 
j/j^* 7  tjpe^Still  a  third  relation  may  dominate  choice  to  the  neg- 
lect of  the  other  two.  A  good  may  be  bought  or  consumed 
merely  or  chiefly  on  account  of  its  bearing  on  the  relations 
of  its  possessor  or  consumer  to  other  members  of  society. 
The  good  may  be  a  means  of  social  distinction  and  may  be 
appreciated  for  no  other  reason.  Here  the  relation  of  the 
consumer  to  other  men  is  the  crucial  point./  The  relation 
of  such  utility  to  satisfaction  is  derivative./ 

These  three  viewpoints  suggest  the  essence  of  the  classi- 
fication of  utility  of  which  most  use  is  made  in  this  essay. 
^Utility  proper  is  due  to  the  intrinsic  qualities  of  a  good, 
or  group  of  goods,  with  reference  to  its  relation,  including 
the  quantitative  relation,  to  the  satisfaction  of  human 
wants. 

If  the  good  is  used  by  itself,  and  if  its  degree  of  utility  is 


THE  SPECIES  OF  UTILITY  13 

not  economically  dependent  upon  associated  or  joint  use 
with  other  goods,  its  utility  is  altogether  particular.  Par- 
ticular utility  belongs  to  a  good  apart  from  its  consump- 
tion groupings.  It  is  not  derived  from  the  group  relation. 

If  the  utility  of  a  good  is  in  part  due  to  association  with 
/  other  goods  in  consumption,  the  utility  is  in  so  far  com- 
plementary. Such  complementary  utility  of  a  particular 
good  is  a  portion  of  the  utility  proper  of  the  complete  group 
to  which  the  good  belongs.  Complementary  utility  is  sub- 
ject to  the  influence  of  shif  tings  and  rearrangements  among 
consumption  goods.  Its  distribution  among  the  members 
of  the  group  is  also  ordinarily  indeterminate.  But,  as 
merely  complementary  utility,  it  is  at  any  rate  not  notice- 
ably centered  upon  or  monopolized  by  one  or  a  few  mem- 
bers of  the  group. 

These  definitions  may  appear  to  be  open  to  objection  on 
the  ground  that  they  wrongly  assume  that  a  thing  can  have 
utility  independently  of  its  relations  to  other  things.  All 
utility,  according  to  a  possible  interpretation  of  the  defini- 
tions, is  complementary.  For  example,  the  utility  of  the 
air  or  of  its  oxygen  depends  on  the  presence  of  combustibles 
in  the  body,  and  also  the  oxygen  must  be  mixed  with  nitro- 
gen to  dilute  it  for  breathing.  Conversely,  the  utility  of 
food  and  of  all  other  goods  depends  on  the  supply  of  air  for 
breathing.  This  objection  is  perhaps  best  met  on  the  prac- 
tical ground  that,  as  a  matter  of  ordinary  experience,  many 
such  things  will  be  available  without  care  and  may  be 
assumed  to  be  available  as  a  matter  of  course.  They  need 
not  be  sought  out  or  thought  of,  and  their  relations  to  the 
satisfactions  obtainable  from  other  things  will  not  ordi- 
narily need  to  receive  any  consideration.  But  the  writer 
does  not  wish  definitely  to  confine  the  applicability  of  this 
classification  of  utility  to  technically  economic  as  distin- 
guished from  free  goods. 

Circumstances  may  be  such  as  to  concentrate  attention 
on  one  member  of  a  group  of  goods.  It  may  be  obtainable 


n       WELFARE  AS  AN  ECONOMIC  QUANTITY 

only  on  condition  of  imputing  to  it  more  than  its  propor- 
tion, possibly  all,  of  the  non-particular  utility  of  the  group 
in  which  it  is  to  be  used.  This  case  may  be  distinguished 
as  transputing  utility  from  the  less  regarded  to  the  fa- 
vored one  among  the  complements.  In  the  later  years  of 
the  First  French  Empire  the  utility  and  value  of  gunpow- 
der was  mainly  imputed  to  saltpeter  because,  with  foreign 
supplies  cut  off,  this  ingredient  was  especially  difficult  to 
get.  {Transputed  utility  is  due  to  a  relation  to  other  goods 
such  that  their  full  use  and  enjoyment  is  felt  to  be  practi- 
cally so  thoroughly  dependent  upon  the  control  of  the 
good  in  question  that  its  utility  is  exalted  and  theirs  de- 
pressed. Utility,  or  more  utility,  is  transputed  to  the  rarer 
complement  in  amount  greater  than  would  be  attributed 
to  it  because  of  its  other  uses  or  merely  for  its  own  quali- 
ties. Instead  of  being  shared  proportionately,  the  comple- 
mentary utility  of  the  group  (a  part  of  the  utility  proper 
of  the  group)  is  chiefly  or  exclusively  credited  to  one  of  its 
members.  Transputation  is  a  sort  of  monopolization  of 
complementary  utility,  its  abstraction  from  other  comple- 
ments and  concentration  on  one.  "Transputation"  con- 
veys the  idea  of  such  a  carrying  over  or  transference  of 
attributed  utility.1 

f-  The  term  "transputed"  itself  suggests  the  close  relation 
•  of  the  conception  to  that  of  imputation,2  so  familiar  to  stu- 
dents of  Austrian  theory.  Transputation  is  a  special  case 
/of  imputation.  Though  properly  more  general,  the  idea  of 
imputation,  as  it  has  in  fact  been  used  and  may  well  con- 
tinue to  be  used,  does  not  look  beyond  value  to  the  utility 
that  is  its  foundation,  while  transputation  refers  chiefly 
to  utility  and  consumption.  The  Austrian  theory  of  impu- 
tation assumes  that  utility  has  \  no  practical  significance 
apart  from  value,  while  the  conception  of  transputation 

1  The  term  has  been  adopted,  after  much  unavailing  effort  to  find  a 
better  one,  at  the  suggestion  of  Professor  Johnson. 

2  Used  by  Smart  to  translate  the  German  Zurechnung. 


THE  SPECIES  OF  UTILITY  15 

recognizes  the  coordinate  contribution  of  various  members 
to  a  group-effect,  and  considers  the  concentration  of  group 
utility  and  value  exceptional  and  its  equitable  distribu- 
tion normal.  All  complementary  or  non-particular  value 
iis  imputed  to  group  members,  while  transputed  utility 
will  seldom  thus  absorb  all  non-particular  utility  and  may 
|  not  be  distinguishable  at  all.  The  one  rejects  while  the 
other  accepts  the  idea  that  the  concentration  of  value  by 
imputation  does  prejudice  to  other  coordinate  elements 
involved,  though  this  difference  may  be  due  entirely  to  the 
difference  between  intermediate  goods,  so  conspicuous  in 
Austrian  theory,  and  the  immediate  utility  affected  by 
r  transputation.  Imputation  relates  to  the  attribution  of 
value  in  production  and  distribution.  Transputation  is  a 
result  of  the  complementary  relation  in  its  bearings  on 
economic  consumption.  Some  further  attention  is  given 
to  the  terminological  question  in  a  later  chapter.1 

Transputed  utility  is  a  result  of  the  complementary 
relation  plus  relative  scarcity  of  one  or  more  of  the  com- 
plements. This  relative  scarcity  is  a  matter  of  the  quan- 
titative relations  between  the  supplies  of  the  different 
goods  involved,  and  is  to  be  distinguished  from  that 
scarcity  which  is  the  basis  of  marginal  utility,  the  latter 
sort  of  scarcity  being  a  matter  of  the  quantitative  relation 
between  supply  and  recognized  need. 

Non-particular  utility  proper  is  thus  divided  into  merely 
complementary  utility,  or  untransputed  complementary 
utility,  on  the  one  hand,  and  transputed  utility  on  the 
other.  When  the  non-particular  utility  is  equitably  at- 
tributed to  each  member  of  the  group,  it  is  merely  com- 
plementary. When  one  complement  by  force  of  circum- 
stances gets  more  than  its  share,  the  non-particular  utility 
is  transputed  in  whole  or  in  part. 

Utility  proper  includes  ordinary  complementary  along 
with  particular  utility,  but  transputed  utility  relates  to  a 
1  Chap,  x,  footnote,  p.  116. 


16   WELFARE  AS  AN  ECONOMIC  QUANTITY 

different  set  of  circumstances  or  a  further  removed  point  of 
view.  The  latter  may  be  founded  upon  the  larger  comple- 
mentary relation  between  all  the  goods  or  experiences  of  a 
life.  These  are  not  subject  to  individual  control  or  direc- 
tion, and  therefore  not  of  practical  economic  interest.  Un- 
transputed  complementary  utility,  on  the  other  hand,  is 
chiefly  of  significance  for  the  smaller  groupings  of  daily 
practice.  The  larger  scope  of  the  relation  is  not  ordinarily 
given  attention  or  else  is  problematic.  The  group  within 
which  utility  is  transputed  is  often  more  extensive  than 
the  particular  goods  occupying  the  attention,  as  in  the 
case  of  the  occasional  excessive  utility  of  necessaries  dis- 
cussed in  a  later  chapter.1  In  order  that  there  may  be 
transputed  utility,  it  is  true,  there  must  be  some  group  re- 
lation further  on  —  some  group  the  utility  proper  of  which 
is  the  ultimate  ground  for  transputation.  But  the  connjec- 
tion  may  be  effective  through  instinct  and  need  not /be 
^the  subject  of  conscious  and  rational  economic  judgment. 
The  classification  of  utility  as  either  transputed  or  else 
proper  applies  in  strictness  only  for  coordinate  goods,  the 
proper  utility  in  question  having  nothing  to  do  with  that 

Vmore  or  less  indefinite  relation  of  dependence  which  is  the 
basis  of  the  transputed  utility..  The  transputed  utility  of 
a  good  is  not  to  be  set  over  against  the  proper  utility  of 
the  group  to  which  the  same  good  belongs,  but  over  against 
that  of  other  members  of  the  group,  the  utility  of  the 
group  as  a  whole  being  on  a  different  level.  From  the 
standpoint  of  terminology  it  might  be  preferable  to  oppose 
transputed  and  particular  utility  but  for  the  fact  that 
transputed  utility  need  not  absorb  all  the  non-particular 
utility  in  the  group,  and  because  of  the  larger  groups  from 
which  transputed  utility  may  be  derived.  Particular  and 
complementary  utility,  proper  and  transputed  utility,  have 
different  limits  and  different  division  lines,  except  that  all 
are  contained  within  the  limits  of  the  utility  proper  of  some 
1  See  Chap.  xi. 


THE  SPECIES  OF  UTILITY  17  | 

group.  'The  complementary  relation  and  the  utility  due 
to  it  are  the  basis  of  imputation  and  transputation.  But 
complementary  utility  is  usually  super-marginal  and  often 
free,  while  transputed  utility  is  always  economic  value,  and 
follows  laws  of  value,  and  not  merely,  or  even  principally, 
those  of  utility  as  such.  But  we  must  postpone  further 
treatment  of  these  rather  complicated  relations  to  later 
Chapters. 

Utility  may  be  classified  on  still  another  basis  as  either 
adventitious  or  non-adventitious.  The  writer  can  find  no 
better  term  for  the  latter  than  utility  proper. 

Adventitious  utility  is  not  due  to  the  intrinsic  qualities  of 
the  object  nor  to  its  complementary  relation  to  other  goods, 
but  to  a  conventional  social  significance,  in  the  view  of  the 
possessor  and  others,  attaching  to  the  possession  and  use  of 
certain  goods.  Adventitious  utility  is  due  to  relations 
between  persons,  and  finds  its  expression,  rather  than  its 
habitat,  in  the  valuation  and  use  of  goods/)  This  social  sig- 
nificance of  expenditure  and  consumption  upon  which 
adventitious  utility  is  founded  is  not  analyzed  and  thought 
out,  or  even  thought  of  at  all,  by  those  who  are  active  in  its 
exploitation.  It  is  conventional  in  nature  and  might  be 
designated  "conventional"  utility  but  for  the  too  general 
use  and  too  broad  implications  of  the  word,  f  Reflective 
analysis  on  the  part  of  the  consumer  would  usually  be  fatal 
to  adventitious  utility! 

Adventitious  utility  may  also  be  complementary  or 
transputed.  But  the  complementary  relation  here  reveals 
nothing  new.  Transputation,  moreover,  is  unimportant  in 
the  field  of  adventitious  utility,  since  the  psychical  charac- 
ter of  the  latter  is  very  simple  and  at  the  same  time,  in 
its  particular  external  expression,  very  fragile.  Hence  it 
cannot  bear  the  strain  of  complex  transputation,  which  is 
likely  to  initiate  rational  analysis  and  questioning. 

It  is  in  connection  with  adventitious  utility  that  the 
social  or  socio-psychical  factor  in  consumption  is  especially 


18   WELFARE  AS  AN  ECONOMIC  QUANTITY 

prominent.  The  material  for  a  comprehensive  analysis  of 
utility,  therefore,  or  for  a  study  of  its  variation,  could  not 
be  supplied  by  the  experience  of  a  Robinson  Crusoe.  The 
adequate  study  of  consumption  is  a  task  of  the  social 
sciences. 

f  Neither  transputed  nor  adventitious  utility  can  be  pos- 
sessed by  free  goods.  Both  are  dependent  upon  the  limita- 
tion of  supply  which  creates  economic  value. 
7*  Another  classification  of  utility  is  based  upon  the  reac- 
tion of  use  and  enjoyment  upon  a  good's  power  to  satisfy. 
If  the  furnishing  of  the  satisfaction  depends  upon  processes 
in  the  good  which  destroy  its  utility,  that  utility  may  be 
distinguished  as  processive  in  character.  If  the  mere  exist- 
ence and  presence  or  the  spatial  relations  of  a  good  give 
satisfaction  without  involving  impairment  of  its  utility, 
the  utility  may  be  called  existential.  By  reason  of  the 
processes  whose  occurrence  or  absence  is  in  question,  the 
good  becomes  or  tends  to  become  a  different  kind  of 
thing,  that  is,  not  a  good  or  less  a  good.  In  production 
the  processes  run  the  other  way.  In  neither  case  can 
their  direction  be  misunderstood.  The  importance  of  the 
distinction  between  these  two  classes  of  utility  for  econ- 
omy in  consumption  is  evident.; 

There  is  another  sort  of  utility,  somewhat  analogous  to 
existential  utility.    The  latter  affords  enjoyment  to  an 
individual  many  times  in  succession  without  any  loss  of  its 
1  power.  Certain  goods,  largely  identical  with  those  possess- 
ing existential  utility,  and  certain  services  may,  without 
detriment  to  their  utility,  be  enjoyed  simultaneously  by 
;  many  consumers,  instead  of  exclusively  by  one  individual 
at  a  time.  This  is  the  case  of  multiple  utility.] 
/    We  may  briefly  summarize  as  follows  the  relations 
/  between  the  various  species  of  utility  discussed.    To  be 
'   distinguished  from  utility  proper  is  adventitious  utility,  the 
former  being  based  on  the  relation  of  the  qualities  of  goods 
\  to  men,  the  latter  on  the  qualities  of  men  and  the  relations 


THE  SPECIES  OF  UTILITY  19 

between  them.  In  contrast  with  utility  proper  from  an- 
other point  of  view  is  transputed  utility.  Complementary 
utility  as  such  is  a  species  of  utility  proper.  From  the  point 
of  view  of  the  complementary  relation,  utility  proper  may 
be  divided  into  particular  and  complementary  utility. 
The  complementary  relation  is  also  the  basis  of  trans- 
putation,  but  transputed  utility  is  different  from  merely 
complementary  utility  in  being  value  as  well  as  utility 
and  in  being  more  or  less  monopolistic.  Existential  and 
processive  utility  are  the  terms  of  an  independent  cross- 
classification,  significant  in  relation  to  the  reaction  of  con- 
sumers upon  goods. 


CHAPTER   III 

THE  LAW   OF  DIMINISHING   UTILITY 

IT  is  too  often  assumed  that  the  diminution  of  utility  — 
sometimes  without  regard  to  regularity  in  the  rate,  some- 
1  times  with  the  implication  that  diminution  proceeds  at  a 
\  diminishing  rate  *  —  is  the  one  and  only  law  of  the  varia- 
tion of  utility.  The  writer  does  not  deny  the  importance  of 
this  principle  or  even  its  primacy.  He  does  believe  that 
economists  have  in  general  been  in  too  much  haste  to  state 
the  "conclusion  of  the  whole  matter"  and  so  have  left  out 
of  account  everything  but  the  final  stage  of  the  variation  of 
utility.  They  have  assumed  that  the  principle  of  diminu- 
tion was  universal  and  have  not  inquired  into  conditions. 
But  they  have  at  least  made  it  unnecessary  to  argue  and 
illustrate  the  fact  of  diminution  of  utility.  We  shall  there- 
fore consider  the  principle  first  with  reference  to  the  differ- 
ences between  it  and  the  conditions  it  presupposes  on  the 
one  hand,  and  the  conditions  and  principles  of  other  kinds 
of  variation  of  utility  on  the  other. 

A  suggestion  of  the  principal  condition  to  the  diminution 
of  utility  is  contained  in  the  very  word  "supply."  The 
utility  —  of  course  the  marginal  utility,  since  the  uses  of 
units  well  within  the  margin  are  ordinarily  not  affected  by 
extension  of  the  supply  —  of  a  unit  of  a  good  whose  supply 
is  changing  diminishes  as  the  supply  increases,  and  in- 
creases as  the  supply  diminishes.  But  can  we,  in  conform- 
ity with  the  sense  of  this  proposition,  speak  of  a  supply  of 
such  a  miscellaneous  class  of  commodities  as,  for  example, 
food  or  clothing?  If  an  inhabitant  of  a  northerly  climate 
has  a  supply  of  clothing  consisting  of  one  coat,  what  will  be 
the  diminution  of  utility  accompanying  his  acquisition  of 
another  article  of  clothing,  say  a  pair  of  trousers?  Or 

I1  For  the  position  of  various  economists  as  regards  this  point,  see  the 
footnote  on  p.  24,  below. 


THE  LAW  OF  DIMINISHING  UTILITY         21 

suppose  he  receives  successively  hat,  coat,  trousers,  and 
shoes,  is  the  principle  in  operation  that  of  diminishing 
utility?  Certainly  that  principle  is  somewhat  obscured, 
and  if  so  the  reason  must  be  because  the  conditions  for  its 
operation  are  not  favorable.  That  is  to  say,  contrary  fac- 
tors with  their  different  principles  are  at  work.  How  these 
different  principles  work  is  described  in  later  chapters  to 
which  the  present  discussion  is  a  foil. 

The  problem  suggested  by  the  above  illustration  may  be 
met  by  sharply  defining  the  term  supply.  The  units  of  a 
supply  must  be  like  one  another.  They  must  be  so  much 
alike  as  to  be  interchangeable,  sometimes  perhaps  indis- 
tinguishable. The  principle  of  diminishing  utility  is  oper- 
ative without  qualification  only  in  the  case  of  homogeneous 
goods.  To  avoid  ambiguity  it  might  be  well  to  use  the 
phrase  homogeneous  supply  when  discussing  diminishing 
utility.  But  "a  supply"  is  usually  intended  to  mean  just 
that. 

Since  by  hypothesis  the  character  of  the  good  does  not 
change,  the  reason  why  the  utility  of  successive  units  of  a 
homogeneous  supply  of  goods  diminishes  must  be  sought  in 
the  nature  of  man.  The  reason  is  the  diversity,  we  might 
say  the  versatility,  of  human  wants.  There  is  a  best  use  to 
which  a  particular  kind  of  good  may  be  put  and  a  single 
available  unit  will  be  put  to  that  use.  Both  reason  and 
instinct  require  the  application  of  a  good  to  the  satisfaction 
of  the  strongest  desires  or  elements  of  desire  first.  Added 
units  will  be  successively  applied  to  uses  for  which  they  are 
less  needed  or  less  well  adapted.  \  The  most  important 
class  of  uses  of  wood  is  for  the  parts  of  furniture  and  imple- 
ments. Next,  ranks  its  use  for  the  floors  and  interior  fin- 
ish of  houses.  In  America  lumber  has  until  recently  been 
so  cheap  that,  except  under  special  conditions,  houses  have 
usually  been  constructed  entirely  of  wood  above  the  foun- 
dations. Where  wood  is  the  available  fuel  this  use  ranks 
next.  Buildings  to  house  cattle  are  of  less  direct  human 


22       WELFARE  AS  AN  ECONOMIC  QUANTITY 

interest.  Whether  crops  also  are  to  be  completely  housed 
when  harvested  is  not  of  so  decisive  importance  as  to  make 
barns  generally  adequate  to  this  use,  even  where  lumber  is 
very  cheap.  The  burning  of  timber  merely  to  make  potash 
is  no  longer  a  recognjzed  industry.  The  distillation  of  wood 
to  obtain  alcohol  is  a  low  grade  of  use  applicable  only  to 
what  are  in  effect  wood  residuals.  Of  course  there  are 
within  each  of  these  uses  or  classes  of  uses  all  gradations 
in  the  importance  of  individual  uses  to  which  particular 
articles  are  put.  Human  ingenuity  will  continue  to  find 
uses  for  a  large  supply  of  material  or  a  large  number  of 
articles  of  quite  the  same  kind,  but  uses  in  which  the 
units  of  the  supply  are,  under  static  conditions,  less  and 
less  effective. 

r  Subjectively  considered,  it  might  be  questioned  whether 
two  articles  are  ever  put  to  quite  identical  uses.  The  first 
and  the  second  pieces  of  bread  do  not  satisfy  exactly  the 
isame  kind  of  want;  they  do  not  produce  exactly  the  same 
sort  of  satisfaction  in  a  hungry  man.  It  is  hardly  possible 
that  two  meals,  though  they  be  objectively  identical  in 
every  particular,  be  quite  the  same  to  the  consumer^  It  is 
only  because  we  discriminate  desires  by  their  objects  that 
we  are  likely  to  think  of  a  particular  kind  of  good  as  satis- 
fying always  the  same  sort  of  want.  The  utility  of  a  sup- 
ply of  goods  is  in  its  very  nature  compounded  of  many  uses. 
Want  and  demand  are  always  composite,  varying,  kalei- 
doscopic, j 

S  Owing  to  the  considerable  degree  of  interchangeability  of 
goods  and  to  the  diversity  of  their  groupings  in  consump- 
tion, the  application  of  later  units  of  a  supply  is  likely  to  be 
to  uses  or  desires  objectively  distinguished  as  of  a  different 
kind  from  those  to  which  earlier  units  are  applied.}  Some 
corn  may  be  used  for  hominy  pudding  and  for  johnnycake. 
Some  will  feed  the  chickens  and  thus  supply  eggs  and 
poultry  for  the  table.  Some  is  reserved  for  seed.  Some 
becomes  proprietary  breakfast  food.  Much  goes  to  the 


THE  LAW  OF  DIMINISHING  UTILITY          23 

production  of  pork  and  much  is  fermented  and  distilled  to 
become  whiskey.  Some  becomes  the  starch  in  our  collars 
and  some  makes  glucose  and  syrup  and  candy  of  low  grade. 

T  This  diversity  of  wants  and  uses,  including  in  increas- 
ing proportion  new  kinds  of  uses  and  future  uses,  to  which 
an  increasing  supply  of  goods  is  appropriated,  becomes 
greater  as  the  good  becomes  more  easily  obtainable.  It  is 
owing  to  this  fact  that  the  diminution  of  utility  proceeds  at 
a  diminishing  rate.  The  curve  of  utility,  or  of  demand,  that 
is,  demand  for  consumption  as  distinguished  from  demand 
for  exchange,  is  regularly  bent  more  and  more  away  from 
the  vertical.  It  is  concave.  This  concave  character  is  a 
result  of  the  stimulus  which  the  increase  of  means  imparts 
to  the  expansion  of  wants.  \ 

|  The  proposition  that  the  diminution  of  utility  pro- 
ceeds at  a  diminishing  rate  is  one  of  those  very  general 
facts  that  would  be  recognized  as  common  sense  if  it 
could  only  be  stated  in  unmathematical  terms.;  But  exact 
language,  and  the  abstractness  of  conception  that  is  its 

•t  necessary  condition,  is  repellant.  The  point  is  simply  that 
the  diversification  of  uses  of  an  increasingly  abundant 
supply  will  ordinarily  or  regularly  be  increasingly  rapid  as 
the  supply  of  an  article,  and  the  ease  with  which  it  is  ob- 
tained, increases/  The  number  of  distinguishable  uses  will 
therefore  increase  at  a  greater  rate  than  in  proportion  to 
the  increase  in  the  amount  of  the  supply.  If  apples  at 
$3  a  bushel  are  reserved  for  a  single  use  (or  a  single  dozen 
uses),  but  will  have  two  uses  at  $2,  they  will  not  have 
merely  three  at  $1,  or  four  on  becoming  free  goods,  but 
certainly  more  than  in  the  proportion  indicated.  (Every 
downward  step  in  difficulty  of  attainment  that  is  of  equal 
absolute  importance  will  be  increasingly  effective  in  pro- 
moting the  development  and  application  of  new  uses.) 
On  general  grounds,  that  is,  because  of  the  fundamental 
attribute  of  human  nature  according  to  which  attention 
and  thought  run  in  terms  of  relative  quantities,  equal 


24   WELFARE  AS  AN  ECONOMIC  QUANTITY 

relative  steps  are  much  more  likely  to  be  of  equal  effec- 
l^yeness. 

/  The  law  of  diminishing  utility  exactly  expressed  im- 
plies, not  mere  diminution  of  utility  as  supply  increases, 
but  diminution  at  a  diminishing  rate!  Some  economists  ac- 
cept this  implication.  Others,  by  their  manner  of  drawing 
the  curve  or  otherwise,  show  that  they  have  in  mind  only 
the  less  definite  concept.1  By  the  law  of  diminishing  utility, 

Vy 

1  Marshall's  statement  is:  "The  one  universal  rule  to  which  the  de- 
mand curve  conforms  is  that  it  is  inclined  negatively  throughout  the  whole 
of  its  length"  (Principles  of  Economics,  footnote  on  p.  160  of  the  1st 
edition;  p.  99  of  the  5th  edition).  In  order  to  simplify  things  we  may  take ' 
this  as  referring  to  the  demand  curve  of  an  individual,  which  is  in  the 
form  the  same  as  his  utility  curve.  If  the  word  supply  may  sometimes 
be  taken  in  a  loose  enough  sense  to  include  goods  bearing  in  some 
degree  a  complementary  relation  to  one  another,  the  statement  quoted 
claims  too  much.  Cf .  chapter  ix,  below.  If  it  be  taken  to  refer  to  particu- 
lar utility  only,  it  explicitly  avoids  being  as  definite  as  it  might  be.  But 
Marshall's  utility  curves  are  drawn  as  continuously  concave. 

Jevons's  practice  (Theory  of  Political  Economy)  also  conforms  to  the  as- 
sumption of  diminution  at  a  diminishing  rate.  The  same,  on  cursory  exami- 
nation, appears  to  be  true  of  Walras  (Elements  d  economic  politique  pure, 
1874).  The  Austrians  do  not  employ  graphic  methods  of  exposition,  hence 
it  is  not  easy  to  say  what  course  they  would  ascribe  to  the  variation  curve, 
if  they  were  interested  in  it.  The  greater  number  of  economists  are,  for 
the  same  reason,  not  specific  on  this  point. 

On  the  other  hand,  Professor  Patten,  as  cited  on  p.  39,  below,  illus- 
trates the  possibilities  of  an  entirely  arbitrary^handling  of  the  form  of  the 
curve.  Professor  Fetter  (Principles  of  Economics^  1904,  p.  24)  makes  the 
curve  convex  at  its  lower  portion.  There  are  other  cases  where  the  curve 
is  allowed  to  cut  the  base  line,  but  this  is  of  little  importance  if  its  con- 
cavity is  maintained. 

(  A  conspicuous  but  rather  ambiguous  case  is  that  of  Professor  John  B. 
Clark.  His  utility  curves  are  in  general  concave  throughout  their  length. 
But  on  p.  222  of  his  Distribution  of  Wealthy  the  horizontal  summation  of 
convex  curves  is  made  to  yield  a  concave  curve.  On  p.  225  there  is  a  simi- 
lar con  vex  curve.  This  may  be  explained  as  due  to  his  attempt  to  deal  with 
utilities  that  are  absolutely  alike.  He  says:  "Of  a  series  of  utilities  that 
are  exactly  alike,  the  first  is  measured  by  a  positive  quantity  and  all  fol- 
lowing ones  by  negative  quantities"  (pp.  231-33).  The  writer's  position, 
as  explained  in  chapter  iv,  is  that  the  homogeneity  postulated  for  dimin- 
ishing utility  is  entirely  an  affair  of  goods  and  not  of  wants,  and  also  that 
time  of  consumption  should  not  be  thought  of  as  restricted  to  the  present. 
But  it  is  of  some  interest  to  attempt  to  trace  the  diminishing  utility  of 
a  quality,  instead  of  a  good.  The  quality,  however,  should  be  objectively 
definable. 


THE  LAW  OF  DIMINISHING  UTILITY          25 

or  of  normal  diminishing  utility,  < —  if  there  is  occasion  for 
exactness  of  expression,  —  the  writer  always  means  dimin- 
ishing utility  at  a  diminishing  rate.  We  shall  shortly  see 
that  the  conception  can  be  made  even  more  exact  and 
mathematical  —  and  at  the  same  time,  of  course,  more 
abstract  and  restricted  as  to  its  practical  application.  In 
any  case  the  comprehensive  conception  of  the  variation  of 
utility  must  provide  for  other  principles  of  variation  and 
for  other  forms  of  the  curve  of  variation. 

r~  The  apparently  convex  form  of  the  curve  of  diminishing 
utility  at  its  lower  end,  or  its  more  rapid  decline  and  abrupt 

j  termination,  is  not  contradictory  to  the  principle  of  decline 
at  a  diminishing  rate.  The  perishable  character  of  certain 
utilities,  together  with  the  limited  capacity  of  correspond- 
ing appetites,  produces  the  phenomena  of  saturation  for 

.,  the  consumption  of  certain  goods,  for  example,  ice  cream, 
if  time  is  limited,  j  This  fact  is  in  part  responsible  for  a  too 
broad  generalization  with  regard  to  the  lower  end  of  the 
curve.  But  the  appearance  of  an  abrupt  drop  may  be  due 
also  to  the  influence  of  indirect  costs,  accompanied,  of 
course,  by  the  exhaustion  of  such  possibilities  of  out-sub- 
stitution—  that  is,  devotion  of  some  units  of  the  supply  to 
purposes  ordinarily  served  by  entirely  different  goods  —  as 
will  cover  these  indirect  costs.  When  price  becomes  almost 
negligibly  small,  other  elements  of  cost  that  are  ordinarily 
themselves  negligible,  such  as  the  cost  of  going  to  the  place 
of  sale,  of  calculation  of  utility,  of  bargaining,  of  devising 
new  uses,  of  caring  for  a  supply  for  the  future,  etc.,  out- 
weigh the  marginal  utilities  which  have  become  very  small, 
and  put  an  end  to  demand.  "Enough  is  enough."  At  least 
enough  causes  inertness.  But  such  an  end  to  the  expansion 
of  use  does  not  affect  the  standing  of  the  general  principle 
of  diminishing  utility.  Economists  who  represent  the  curve 
expressing  this  sort  of  variation  of  utility  as  normally  con- 
vex at  any  part  of  its  length  are  thus  open  to  criticism. 
Allowing  the  curve  ever  to  cut  the  base  line  is  also  ob- 


26   WELFARE  AS  AN  ECONOMIC  QUANTITY 

jectionable,  though  defensible  on  grounds  of  conven- 
ience. 

The  effect  of  neglected  costs  upon  the  curve  of  diminish- 
ing utility  is  shown  in  Diagram  I. 

It  is  possible  to  give  a  more  subjective  or  psychological 
explanation  of  the  phenomena  of  diminishing  utility.  It 
may  be  said  to  be  a  corollary  of  Weber's  and  Fechner's  law 
of  psycho-physical  relations,  according  to  which,  in  order 
that  the  psychical  intensity  of  a  sensation  may  increase  at 
a  constant  arithmetical  rate,  the  physical  intensity  of  the 
corresponding  stimulus  must  increase  at  a  geometrical 
jcate. 

It  is  to  be  noted  that  diminishing  utility  relates,  not  to 
the  intensity  of  sensation,  but  to  its  extent,  or  to  the  exten- 
sion of  ideas  and  of  feelings  of  satisfaction  accompanying 
ideas,  especially  ideas  of  possession.  The  supply,  moreover, 
whose  utility  is  felt  by  anticipation,  and  judged,  need  not 
be  in  sight.  It  need  only  be  contemplated  quantitatively, 
as  in  the  case  of  purchase  from  a  distant  store.  It  is  not  a 
matter  of  course  that  Weber's  Law  applies  to  states  so 
remote  from  the  intensity  of  sensation  following  directly 
upon  peripheral  stimulation.  Nevertheless,  the  generality 
of  the  psycho-physical  law  is  so  great  that  the  suggestion 
of  a  connection  with  diminishing  utility  is  not  to  be 
scouted. 

It  is  to  be  observed  that,  if  we  can  accept  the  psycho- 
physical  formula,  we  have  thus  not  merely  further  support 
for  the  principle  that  utility  diminishes  at  a  diminishing 
rate,  but  we  know  the  exact  form  of  the  normal  curve  of 
diminution. 

The  graphic  representation  of  the  relation  between  the 
variation  of  satisfaction  or  utility  and  that  of  the  corre- 
sponding physical  quantity  as  expressed  by  Weber's  Law 
requires  some  use  of  mathematics.  We  want  a  curve  show- 
ing the  derivative  variation  of  utility  supposing  supply  to 
increase  by  regular  increments.  Diagram  II  is  designed  to 


carve 


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j|..  MM..  .],....  .....4.  ...MM.. 


THE  LAW  OF  DIMINISHING  UTILITY          29 

show  both  the  form  of  this  curve  and  a  method  of  con- 
structing it. 

In  this  diagram  AB  represents  the  vertical  line  of  refer- 
ence and  AX  represents  the  horizontal  line  of  reference  or 
base  line.  The  supposition  that  the  increments  of  physical 
supply  are  continuous  and  of  equal  size  is  represented  by 
drawing  the  horizontal  straight  line  DE,  beginning  at  the 
vertical  line  of  reference  (the  origin  of  the  supply),  to  the 
left  and  equidistant  from  the  base  line;  that  is,  DE  is  par- 
allel to  the  base  line.  The  rectangular  area  subtended  by 
any  given  segment  of  DE  beginning  at  D  represents  supply 
at  the  given  stage  of  its  development.  The  quantity  of  the 
supply  is  shown  by  the  horizontal  scale,  but  whatever 
happens  to  be  the  economic  unit  of  supply  may  be  repre- 
sented by  any  definite  length  on  the  scale. 

The  value  assigned  to  DA,  as  well  as  to  any  unit  of  the 
supply  area,  is  arbitrary,  and  any  convenient  constant  may 
be  used.  We  may  reduce  this  constant  DA,  and  thus  the 
area  upon  which  it  depends,  to  as  small  a  figure  as  we  will 
without  affecting  the  purpose  of  the  diagram.  Also,  mere 
units  of  length  along  the  base  line  may  thus  adequately 
represent  supply.  Indeed,  this  is  the  usual  method  with 
diminishing  utility  and  demand  curves. 

We  may  make  any  convenient  supposition  as  regards  the 
psychical  effectiveness  or  utility  of  the  first  increment  of 
supply.  In  order  to  show  the  mathematical  relations  be- 
tween physical  and  psychical  quantities,  the  latter  will  be 
plotted  with  reference  to  the  same  lines  (AB  and  AX)  as 
the  former  and  its  quantity  at  successive  stages  of  the 
development  of  the  physical  supply  will  likewise  be  repre- 
sented by  an  area  subtended  by  a  curve  whose  position  has 
a  mathematical  relation  to  AB  and  AX  which  we  are  to 
determine.  For  the  first  unit  of  supply  we  may  assume  a 
psychical  effectiveness  corresponding  to  the  area  of  the 
rectangle  AFKJ.  We  may  further  assume  that  the  psycho- 
physical  relation  obtaining  here  causes  a  decline  of  the 


30       WELFARE  AS  AN  ECONOMIC  QUANTITY 

psychical  effectiveness  of  the  successive  units  of  supply 
such  that,  in  order  to  produce  a  second  psychical  effect  or 
amount  of  utility  equal  to  that  corresponding  to  the  first 
unit  of  supply,  the  second  increment  of  supply  must  be 
double  the  first.  Likewise,  the  third  increment  of  supply 
must  be  double  the  second  to  be  equally  effective,  and  so 
on.  In  other  words,  in  order  that  the  increments  of  utility 
be  constant,  the  increments  of  supply  must  form  a  geometri- 
cal progression,  whose  ratio  (constant  multiplier),  in  this 
case,  is  J.  This  use  of  the  geometrical  series  conforms  to 
the  quantitative  relation  between  any  two  pairs  of  suc- 
cessive increments  of  utility  and  supply  according  to  the 
psycho-physical  law.  Therefore,  if  — 

supply  rectangle  AFUD  corresponds  to  the  utility  rectangle  AFKJ 
then      "  "        FGVU          "  "    "       "  "       FGLY' 

and       "  "       GHWV        "  "    "       "  "       GHMR 

and  so  on. 

Each  successive  quantity  of  utility  requires  a  supply 
increment  twice  as  great  as  that  which  produced  the  pre- 
ceding equal  quantity  of  utility.  These  utility  rectangles 
are  shown  in  the  diagram  by  fine  dotted  lines. 

It  may  be  well  to  note  here  that  the  areas  representing 
supply  and  utility,  respectively,  in  this  diagram  have  no 
necessary  or  determinable  ratio  to  each  other  at  any  stage 
of  their  development.  The  two  areas  are  incommensur- 
able with  each  other.  Only  their  variations,  the  successive 
increments  of  the  subtended  areas,  are  susceptible  of 
quantitative  comparison. 

The  problem  now  before  us  is  to  derive  and  plot  a  curve 
determined  by  these  utility  (dotted)  rectangles.  This  curve 
must  pass  through  the  centers  of  their  upper  sides,  P1?  P2, 
P3,  P4,  and  P5.  But  the  number  of  the  points  thus  deter- 
mined is  too  few  and  their  intervals  too  variable  to  define 
a  curve  sufficiently  for  ordinary  graphic  purposes. 

The  curve  passing  through  these  points  is  what  mathe- 
maticians call  a  rectangular  hyperbola.  We  need  not  here 


THE  LAW  OF  DIMINISHING  UTILITY 


31 


M 


undertake  a  demonstration  of  this  fact.1  The  equation  of  a 
rectangular  hyperbola  is  xy  =  c.  What  this  means  is  that 
x,  which  is  the  distance  of  any  point  on  the  curve  from  the 

1  To  such  readers  as  may  be  prepared  and  inclined  to  go  into  the 
mathematical  proof  of  the  above  proposition  the  following  demon- 
stration is  offered.  For  it 
the  author  of  this  essay  is 
indebted  to  Mr.  L.  H.  Lu- 
barsky. 

Preliminary  Propositions. 
Certain  fundamental  terms 
of  analytics  pertaining  to 
rectangular  coordinates  are 
illustrated  by  the  accom- 
panying figure:  — 

Let  X'OX  and  Y'OY  be 
two  straight  lines  intersect- 
ing at  right  angles  at  0. 

X'OX,  the  horizontal  line, 
is  called  the  axis  of  abscissae 
or  the  axis  of  x. 

Y'OY,  the  vertical  line,  is 
called  the  axis  of  ordinates 
or  the  axis  of  y. 

X'OX  and  Y'OY  are  together  called  the  rectangular  axes  of  coordi- 
nates. 

0,  the  point  of  intersection  of  the  axes,  is  called  the  origin. 
If  Pj  is  any  point  on  the  curve,  and  P^M  is  drawn  perpendicular  to 
X'OX,  and  P^  perpendicular  to  Y'OY,  then 

OM  ( —  P^N)  is  called  the  abscissa  or  x  of  point  Pr 
ON  (=  P^M)  is  called  the  ordinate  or  y  of  Pr 

OM  and  ON  are  together  called  the  coordinates  of  the  point  Pj  or  the 
xlt  yl  of  the  point. 

Every  point  is  given  by  its  coordinates  x  and  y.  The  abscissa  of  the 
point  is  written  first  and  is  represented  by  some  x  with  a  subscript,  and  its 
ordinate  second,  represented  by  some  y  with  the  same  subscript.  Thus, 
for  point  P2  (x2,  y2)t  x2  denotes  the  abscissa  of  P2,  which  is  the  line  OK, 
and  y2  denotes  the  ordinate  of  P2,  which  is  the  line  OL. 

Each  curve  is  a  locus  of  points,  that  is,  a  line  formed  by  the  continu- 
ous movement  of  a  point.  If  the  curve  is  a  mathematical  one  the  point 
moves  according  to  some  given  conditions.  Since  each  point  is  expressed 
by  its  coordinates  x  and  y,  the  curve  can  be  expressed  in  terms  of  x  and  y. 
To  determine  the  exact  relation  of  x  and  y  is  to  derive  the  equation  of 
the  locus.  Until  it  is  determined,  the  general  equation  is  represented  by 

F  (x,  y)  =  0 

F(x,  y)  is  read  function  x,  y,  and  it  means  some  expression  whose  value 
depends  on  x  and  y. 


32       WELFARE  AS  AN  ECONOMIC  QUANTITY 

vertical  axis  (the  axis  of  ordinates)  and  is  known  as  the 
abscissa  of  the  point,  multiplied  by  y,  which  is  the  distance 
of  the  same  point  from  the  horizontal  axis  (the  axis  of 
abscissae)  and  is  known  as  the  ordinate  of  the  point,  gives  a 
constant  product  c.  Therefore,  when  we  have  determined 
the  value  of  this  constant  c9  we  can  derive  from  it  as  many 

A  line,  EF,  which  touches  the  curve  at  one  point,  such  as  T,  is  called  a 
tangent. 

If  the  point  of  tangency  is  at  infinity,  the  tangent  is  called  an  asymptote; 
if  X'OX  meets  the  curve  at  infinity,  X'OX  is  an  asymptote. 

Problem  and  proof.  The  problem  before  us  may  be  considered  as  com- 
posed of  two  parts :  — 

1.  To  find  the  relation  of  the  rectangular  axes  of  coordinates  to  our 
reference  lines  AX  and  AB;  and 

2.  To  find  the  equation  of  the  curve  P19  P2,  P3,  .  .  .  Q18.  (These  letters 
refer  to  Diagram  II.) 

In  the  text  it  is  given  that  Plt  P2,  Ps,  P4,  and  P5  (the  mid-points  of  the 
upper  bases  of  the  dotted  rectangles)  are  points  on  the  required  curve.  It 
is  also  given  that  the  altitudes  of  these  rectangles  KF,  LG,  ME,  NT, 
etc.,  are  each  half  of  the  preceding  one;  hence,  if  we  denote  the  first  alti- 
tude by  k,  we  have  -»  y  -» -  ...  as  the  series  formed  by  the  altitudes. 

But  this  series  is  a  descending  geometric  series  whose  constant  ratio  is  ^. 
In  such  a  series  the  last  term  approaches  zero  as  its  limit.  That  is,  if  these 
dotted  rectangles  are  continued,  according  to  the  law  laid  down  in  the 
text,  to  infinity,  the  altitudes  of  these  rectangles  will  diminish  in  a  geomet- 
ric ratio  and  approach  but  never  reach  zero  as  their  limit.  The  mid-points 
of  the  upper  bases  of  these  rectangles  are  points  on  the  required  curve, 
and  the  perpendiculars  let  fall  from  these  points  to  the  base  line  AX  are 
equivalent  to  these  altitudes  (parallels  between  parallels  are  equal). 
Hence  these  perpendiculars  form  the  same  descending  geometric  series  as 
the  altitudes,  and  approach  the  line  AX  as  a  limit.  Hence  AX  is  an 
asymptote  to  the  curve  and  may  be  considered  as  the  axis  of  abscissae. 
We  thus  have  one  axis  of  the  curve. 

Since  we  have  determined  the  axis  of  abscissae  and  since  our  axes  are 
rectangular  and  the  reference  lines  AX  and  AB  are  also  rectangular, 
we  may  assume  any  line,  as  OF,  parallel  to  AB  and  at  a  distance  d  from 
it,  as  the  axis  of  ordinates,  the  origin  being  at  0. 

The  rectangular  axes  of  the  curve  are  OX  and  OF,  the  distance  OA 
being  equal  to  d. 

Since  P1?  P2,  P8»  P*>  etc.,  are  given  points  on  the  curve  and  are  the  middle 
points  of  the  upper  bases  of  the  dotted  rectangles  (which  are  plotted  to 
scale  according  to  the  law  explained  in  the  text),  the  coordinates  of  these 


THE  LAW  OF  DIMINISHING  UTILITY          S3 

pairs  of  values  of  x  and  y  as  we  wish  and  thus  determine 
any  number  of  points  on  the  curve. 

The  value  of  x,  it  should  be  noted,  is  not  necessarily  the 
same  as  the  distance  of  the  given  point  from  the  vertical 

points,  according  to  that  scale,  referred  to  our  axes  of  coordinates  are  as 

follows:  — 

PI  (*i,  2/i)  *i  =  d  +  1  J  2/i  =  64, 

PZ  (x»  2/2)  *2  =  d  +  6  2/2  =  32 

PS  (#3»  2/s)  #3  =  d  +  15  2/3  =  16 

P4  (*4»  2/J  z4  =  d  +  33  2/4  =  8 

A  fe  2/5)  *5  =  d  +  69  2/5  =  4 

The  ratios  of  these  successive  abscissae  and  ordinates  are:  — 


2/2  =  32  = 


^  +  6  y2      32 

^+    6  2/2  =  32 

^+15  2/3       16 

rf  +  15  ^s^l^ 

2/48 


Obviously  the  ratios  of  the  ordinates  are  constant.  Assuming  also  that 
any  two  of  the  ratios  of  the  abscissae  are  constant,  we  can  determine  the 
value  of  d.  If  this  derived  value  of  d,  when  substituted  in  the  other  ratios, 
gives  the  same  constant  result  throughout,  both  the  value  of  d  and  the  as- 
sumption are  correct.  Accordingly,  — 


d  +  6  d+15 


The  values  of  the  ratios  of  abscissae  are:  — 


=-  , 

" 


x2      d+6      3  +  6    "9 

g2  =  d  +  6        3  +  6        _9  =  1 
x3  ~~  d  +  15  ~  3  +  15       18  ~  2 

Similarly  the  other  ratios  of  the  abscissae  are  J. 

Hence  the  assumption  that  the  axis  of  ordinates  is  to  the  left  of  AB9 


34       WELFARE  AS  AN  ECONOMIC  QUANTITY 

line  of  reference  AB.  In  other  words,  AB  may  not  be, 
and  in  fact  is  not,  the  axis  of  ordinates  of  this  hyperbola. 

The  value  of  y,  on  the  other  hand,  is  the  distance  of  the 
given  point  from  the  base  line  AX,  for  as  y  becomes  smaller 
and  smaller  the  curve  approaches  (but  never  reaches)  the 
line  AX,  at  which  utility  approaches  zero  as  its  limit.  AX 
is  therefore  an  asymptote  to  the  curve  (that  is,  a  line  which 
touches  or  is  tangent  to  the  curve  at  infinity),  and  is  the 
axis  of  abscissae.  The  axes  of  any  rectangular  hyperbola 
must  be  asymptotes. 

Conformably  to  this  situation  we  may  proceed  alge- 
braically with  certain  equations.  If  c  represents  the  con- 
stant product  whose  numerical  value  we  wish  to  determine, 
and  if  d  represents  the  distance  of  AB  from  the  axis  of 
ordinates,  then  x  will  represent  d  plus  the  distance  of  the 
given  point  on  the  curve  to  the  line  AB,  and  y  the  distance 
of  the  same  point  to  AX.  Then,  since  PI,  P%,  P3,  P4,  etc., 
are  points  on  the  curve,  we  have  the  following  equations 
of  condition  based  on  the  dimensions  of  the  dotted  rec- 
tangles as  plotted  to  scale  in  Diagram  II:  — 

Xi  X  2/1  -  c         or  (d  +  l|)  X  64  -  c      ..............  (1) 

x2Xyt  =  c          or  (d  +   6)  X  32  =  e  ................  (2) 

parallel  to  it,  and  3  units  therefrom  according  to  the  given  scale  is 
correct. 

Multiplying  any  ratio  of  the  abscissae  by  its  corresponding  ratio  of 
ordinates,  we  have 


yt  2/3 

*J-X  ^  =  i  X  2  =  1  ^X^=1X2=1 

*2    y-t  x*    y» 

Clearing  of  fractions,  xlyl  —  x$2        x^/2  =  x$3 

Similar  results  can  be  obtained  for  any  other  pair  of  ratios. 

ButXjt/i  =  Xjyi  =  X3y3  —  .......  are  the  equations  of  condition  of 

the  general  equation  of  a  curve,  xy  equals  a  constant  c.  Hence  the  gen- 
eral equation  of  the  locus  of  the  points  Plt  P2»  ^s»  P&  e^c.,  is  xy  =  c, 
which  is  the  equation  of  the  rectangular  hyperbola.  t  m  L.  H.  L. 


THE  LAW  OF  DIMINISHING  UTILITY          35 

We  will  solve  equations  (1)  and  (2)  for  d  and  c. 

Removing  parentheses  of  (l)  64d  +  96    =  c  ................  (3) 

"  (2)  32d  +  192  =  c  ................  (4) 

Subtracting  (4)  from  (3)        32d  -  96    =0  ................  (5) 

Transposing  32d  =  96  ....................  (6) 

Dividing  by  32  .'.d  =  3  .....................  (7) 

Substituting  this  value  of  d  in  (3),  we  have 

64  X  3  +  96  =  c 
192  +  96  =  c 

/.c  =  288 

Having  determined  the  value  of  c,  we  can  now  replace 
the  general  equation  of  the  rectangular  hyperbola,  xy  =  c, 
by  the  particular  equation,  xy  —  288. 

Identical  solutions  may  be  obtained  from  any  other  two 
points  on  the  curve.  Therefore,  for  the  points  P19  P2,  and  P3, 
we  have 

PI,  when  x  -  4|,  y  =  64 
P2,  "  x  =  9,  y  =  32 
P3,  "  *  =  18,  s/  =  16 

The  product  xi/  =  288  in  all  cases. 

Having  obtained  the  result  xy  =  288,  we  may  easily 
determine  the  value  of  y  for  any  number  of  successive 
physical  units  of  supply  represented  by  five  subdivisions  of 
the  horizontal  scale.  The  successive  values  of  x  on  this 
supposition  are  shown  in  the  middle  column  below.  The 
corresponding  values  of  y  to  satisfy  the  equation  xy  =  288 
are  obtained  by  simple  division  (xy  •*•  x  =  y)  and  are 
shown  in  the  last  column:  — 


288  -J-  5.5  =  52.4  288  -  50.5  =  5.7 

288  ^  10.5  =  27.4  288  -  55.5  =  5.2 

288  -^  15.5  =  18.6  288  -  60.5  =  4.8 

288  +  20.5  =  14.0  288  -  65.5  =  4.4 

288  -f-  25.5  =  11.3  288  -  70.5  =  4.1 

288  +  30.5  =  9.4  288  -  75.5  =  3.8 

288  -f-  35.5  =  9.1  288  -  80.5  =  3.6 

288  -=-  40.5  =  7.1  288  -  85.5  =  3.4 

288  •*-  45.5  =  6.3  and  so  on 


36   WELFARE  AS  AN  ECONOMIC  QUANTITY 

These  computations  furnish,  the  data  for  the  successive 
rectangles  of  equal  width  drawn  on  the  diagram  in  fine 
continuous  lines.  The  determining  points  are  indicated  by 
Qi>  Qv  Qz>  •  •  •  •  Qw  These  points  and  rectangles  show  the 
psycho-physical  relation  where  the  increments  of  supply 
are  constant,  utility  varying  accordingly,  just  as  the 
dotted  rectangles  show  the  same  relation  where  the  incre- 
ments of  utility  are  constant  and  the  increments  of  supply 
conform  to  that  requirement.  The  locus  of  all  the  points  is 
the  curve  shown. 

It  is  of  interest  to  note  that  the  curve  necessarily  bisects 
the  dotted  lines  showing  the  differences  between  the  alti- 
tudes of  the  successive  dotted  rectangles.1  The  further 
points  thus  determined  are  marked  Z^  Z2,  Z3,  etc. 

1   The  values  of  x  and  y  for  the  points  Pv  P2,  P3,  etc.  have  been  pre- 
viously determined. 

For  Pj,  y  =  64  /.  FK  =  64 

"    P2,2/  =  32  /.FF'  =  32 

Subtracting  FK  -  FY'  =  32 

But  FK-FY'=   Y'K 

.*.  Y'K  =  32 
JF'tf=16     ........  1 

Similarly  \HL  =    8     .......  II 

|SM  =    4     .......  Ill 

If  F,  G,  H,  T,  etc.,  are  the  extremities  of  abscissae  of  points  on  the  curve, 
the  values  of  these  abscissae  are  found  from  the  scale  to  be  6,  12,  24,  48, 
etc.  Knowing  the  equation  of  the  curve  to  be  xy  =  288,  we  can  replace 
the  #  by  its  particular  value  and  calculate  the  corresponding  y's,  which  are 
equivalent  to  FZP  GZ2,  ffZ3,  TZ4,  etc. 

When  xis    6,  y  is  48  (=  FZJ 
"      "  "  12,   "  "  24  (=  GZ2) 


"      ""48,  ""    6(= 

Since  FZj  =  48  GZ2  =  24  #Z3"=  12 

and    FY'  =32  GR  =  16  HS  =    8 

Subtracting  F'Z,  =  16  (I')          RZ2  =  8(11')  SZ3  =   4  (III') 

Hence  comparing  I',  II',  and  III'  with  I,  II  and  III,  we  have 


In  other  words,  the  curve  bisects  the  dotted  lines  showing  the  differences 
between  the  altitude  of  the  successive  dotted  rectangles.  Hence  we  may 
consider  the  points  Zv  Z2,  Z3  .  .  .  as  also  determined  by  the  construc- 
tion of  the  diagram.  L.  H.  L. 


THE  LAW  OF  DIMINISHING  UTILITY          37 

We  may  obtain  a  continuous  curve  for  the  normal  dimin- 
ution of  utility  either  by  drawing  in  free-hand  the  connec- 
tion between  the  needful  number  of  points  obtained  as 
above,  or  we  may  plot  a  rectangular  hyperbola  as  de- 
termined by  any  four  of  these  points  according  to  any 
accepted  mathematical  method.  The  curve  is  shown  in 
Diagram  II  as  a  heavy  continuous  line  passing  through 
the  points  determined  by  the  successive  rectangles. 
/  There  is  no  reason  for  assuming  that  the  initial  unit  of  a 
supply  will  have  the  highest  utility  possible  according  to 
the  curvature  revealed  by  the  decline  in  the  utility  of  the 
successive  units.  Mathematically,  this  supposition  would 
always  give  the  initial  unit  an  infinite  utility.  This  does 
not,  according  to  the  psycho-physical  law,  fit  the  facts. 
In  economics  the  generally  accepted  idea  is  that  the  initial 
unit  of  a  supply  has  indefinitely  large,  or  infinite,  utility 
only  in  the  case  of  necessaries.|  In  other  words,  the  axis  of 
ordinates  is  usually  at  the  left  of  the  initial  portion  of  the 
utility  area.  If  the  distance  from  AB  to  the  axis  of  ordi- 
nates is  greater  than  in  Diagram  II,  the  curve  is  corre- 
spondingly flatter. 

/In  a  so-called  "constant-outlay"  curve,1  that  is,  one  in 
which  the  unit  price  of  a  supply  so  varies  as  supply  in- 
/  creases  or  decreases  that  the  aggregate  price  or  value  re- 
(  mains  constant,  the  vertical  line  of  reference  must  coincide 
with  the  axis  of  ordinates.  jThis  curve  also  is  of  course  a 
rectangular  hyperbola.  According  to  the  mathematical 
and  other  implications  of  the  above  discussion,  since  the 
axis  of  ordinates  is  usually  at  the  left  of  the  initial  point 
for  the  supply,  the  total  outlay  will  normally  become  some- 
what greater  as  supply  increases  and  price  declines. 

The  form  of  the  normal  or  regular  diminishing-utility 
curves  of  Diagrams  I,  III,  and  IV  is  the  same  as  that  devel- 
oped in  detail  in  Diagram  II.  The  initial  utility  in  these 
hypothetical  curves,  however,  is  an  arbitrary  matter  and  is 
1  Cf .  Marshall,  Principles  of  Economics,  5th  ed.,  p.  839. 


38       WELFARE  AS  AN  ECONOMIC  QUANTITY 

adjusted  according  to  the  available  space.  The  slope  of  the 
curve  may  thus  be  made  to  vary  at  will. 

The  foregoing  discussion  of  the  mathematical  form  of  the 
normal  curve  may  seem  to  be  mere  mathematics  rather 
than  economics.  The  conception  of  the  normal  law  is 
admittedly,  and  appropriately,  highly  abstract.  Abstractly 
considered  —  whether  the  conditions  are  ever  realized  in 
practice  or  not,  especially  as  regards  the  continuity  of  the 
variation  — [the  curve  of  diminishing  utility  must  be  a  true 
(mathematical  curve,  that  is,  continuously  changing  its 
(direction  according  to  definite  mathematical  law.  Experi- 
;ence  shows  this  law  to  be,  as  roughly  expressed,  diminution 
at  a  diminishing  rateJ  It  is  accordingly  in  harmony  with 
the  facts  of  experience  that  the  normal  curve  never  cuts 
the  axis  of  abscissae  (or,  what  amounts  to  the  same  thing, 
cuts  it  at  infinity),  but  comes  nearer  and  nearer  to  it  by 
relatively  equal  stages.  A  rectangular  hyperbola  meets 
these  requirements  better  than  any  other  curve. 

That  the  normal  curve  belongs  in  the  realm  of  abstrac- 
tion does  not  impair  its  explanatory  quality  and  should  not 
prevent  our  giving  it  its  due  place,  even  though  that  be  a 
small  one,  in  graphic  representation  and  practical  discus- 
sion. 1  We  must  recognize  that "  diminishing  utility  "  is  only 
one  of  several  types  of  the  variation  of  utility,  though 
doubtless  the  most  fundamental  one.  The  variation  of  the 
utility  resulting  from  the  building  up  of  a  complementary 
group  would  obviously  require  an  entirely  different  for- 
mula. But  even  short  of  this  effect,  the  conditions  required 
by  the  normal  law  fail  in  any  case  where  there  is  not  a 
homogeneous  supply  over  against  variety  of  possible  uses. 
The  units  of  commodity  must  also  be  small  and  the  units  of 
use  numerous.  Especially  for  the  individual  consumer 
these  conditions  are  seldom  more  than  imperfectly  real- 
ized.1 Hence  the  normal  law  belongs  among  those  highly 

1  For  the  normal  law  in  relation  to  an  aggregate  or  social  diminishing- 
•  utility  curve,  see  p.  50  jf.  below. 


THE  LAW  OF  DIMINISHING  UTILITY          39 

/abstract  explanatory  principles  that  are  never  self-suffi- 
/  cient,  but  are  chiefly  useful  as  points  of  departure  in  dealing 
v^with  concrete  cases.1  But  in  this  particular  it  has  the  highly 
respectable  company  of  the  law  of  gravitation. 

No  great  practical  importance  need  be  attributed  to  the 
exact  mathematical  form  of  the  curve  of  diminishing  utility 
as  determined  according  to  the  psycho-physical  law.  We 
may  call  this  the  regular  or  normal  curve.  It  is  implied  in 
what  has  already  been  said  that  the  actual  variation  of 
utility  obtained  in  a  concrete  case  (supposing  it  could  be 
exactly  measured)  would  doubtless  differ  greatly  from  this 
norm.  At  best  the  normal  curve  would  represent  only  the 
mean  of  many  such  practical  or  realized  curves.  But  to 
draw  the  curve  in  a  way  strikingly  different  from  the 
psycho-physical  norm,  for  no  assignable  reason,  is  scarcely 
^defensible.  For  example,  the  curve  is  not  a  straight  line.1 
To  draw  it  so  is  contrary  to  the  essential  nature  of  the  law 
6f  diminishing  utility,  strictly  so  called,  according  to 
which,  as  a  homogeneous  supply  increases,  marginal  utility 
diminishes  at  a  diminishing  rate.  Quantitative  conceptions 
that  are  merely  probable  or  on  the  average  true  are  service- 
able as  correctives  of  imaginative  vagaries  even  where  such 
conceptions  are  in  no  sense  of  the  nature  of  exact  science. 
Our  quantitative  ideas  should  be  made  as  definite  as  pos- 
sible even  if  they  also  thereby  become  hypothetical.  1  ITTJ 
fact  the  succeeding  chapters  of  this  book  are  mainly  de-l 
voted  to  showing  the  limitations  upon  the  scope  of  the ; 
diminishing-utility  concept. 

1  On  p.  100  of  Professor  Patten's  Theory  of  Dynamic  Economics,  di- 

i     minishing-utility  curves  for  two  articles  —  or  demand  curves,  but  the 

/     next  page  shows  that  no  distinction  is  made  between  these  two  —  are 

/     presented,  one  of  which  is  convex,  the  other  concave.  On  p.  91  a  utility 

/      curve  is  drawn  as  a  straight  line.  The  same  economist  uses  straight  lines 

/       in  his   Theory  of  Prosperity  on  pp.  17  and  28,  and  convex  curves  on 

pp.  24  and  33. 


CHAPTER   IV 

THE    SCOPE    AND    LIMITATIONS    OF    DIMINISHING 

UTILITY 
f^ 

PRACTICALLY  the  course  of  the  curve  of  diminishing  utility 
may  differ  markedly  from  the  regular  form  above  described. 
Even  as  regards  the  technically  psychological  bearing  of  the 
principle  there  are  qualifications  to  be  taken  into  considera- 
tion. Especially  important  is  the  limitation  due  to  the 
psychological  principles  of  adaptation  and  accommodation. 
'p^Secause  of  this  principle  of  accommodation,  initial  en- 
l  joyment  is  not  always  maximum.  It  takes  time,  so  to  speak, 
vfor  the  organism  to  get  under  way}  One  orange  may  stimu- 
late the  appetite  for  a  second  so  that  it  gives  greater  satis- 
faction than  the  firstj.  I  To  the  drunkard  the  first  glass  of 
whiskey  makes  the  desire  for  a  second  stronger  than  was 
the  original  desire,  the  second  glass  does  the  same  for  a 
third,  and  so  on.  In  this  case  the  situation  on  the  side  of 
demand  clearly  changes  at  each  step,  one  man  plus  one 
whiskey  constituting  a  different  consumer  from  one  man. 
Something  analogous  holds  for  the  oranges./  In  fact,  in 
order  to  keep  the  consumer  a  constant  quantity,  it  is  neces- 
sary to  take  his  reasonable  estimation  of  the  successive 
units,  not  their  immediate  effectiveness  for  satisfaction. 
Whether  the  mind  is  alert  and  expectant,  whether  the  at- 
tention is  focused  upon  the  supply  to  be  enjoyed,  whether 
the  sense-organs  concerned  are  well  rested  and  fresh,  all  of 
these  conditioning  factors  are  rendered  inoperative,  even 
as  disturbing  factors,  if  the  variation  of  utility  is  viewed 
contemplatively  and  calculatingly,  as  is  appropriate  for 
economic  judgments.  This  being  the  fact,  —  though  the 
amount  of  formal  calculation  entering  into  the  process  will 
not  bear  much  emphasis,  since,  in  the  view  of  the  writer, 
judgments  of  value  are  by  nature  intuitive,  —  if  only  one 


THE  SCOPE  OF  DIMINISHING  UTILITY        41 

unit  of  supply,  one  orange  a  year,  for  example,  is  to  be  had, 
it  should  be  regarded  as  a  rarity  to  be  coddled  and  not  to  be 
consumed  when  hunger  is  greatest.  Moreover,  a  reasonable 
estimation  of  the  utility  of  whiskey  will  take  account  of 
future  effects,  not  merely  of  the  immediate  pleasure.  The 
fact  that  initial  enjoyment  is  not  always  maximum,  there-  | 
fore,  does  not  in  any  respect  invalidate  the  law  of  regular J 
diminution  of  utility. 

The  effect  of  the  principle  of  diminishing  utility  is  not  to 
be  confounded  at  the  bottom  of  the  curve  with  that  of  sati- 
ation or  exhaustion  of  capacity  to  enjoy.  The  latter,  like 
accommodation,  produces,  in  effect,  a  different  consumer. 
The  psychology  of  satiation,  moreover,  is  quite  different 
-from  that  of  diminishing  utility.  The  allowing  of  time  to 
I  recover  appetite  is  not  contrary  to  the  principle,  but  rather, 
for  the  purposes  of  economics,  to  be  taken  for  granted.  So 
also  is  the  allowing  of  opportunity  for  diverse  uses./  Pearls 
might  be  so  abundant  relative!  y  to  the  needs  of  a  particular 
consumer  as  to  make  their  use  for  flavoring  a  drink  by  dis- 
solving them  in  vinegar  an  experiment  worth  trying.  The 
utility  proper  so  obtainable,  it  is  true,  is  of  little  significance 
compared  with  the  adventitious  utility,  but,  with  regard 
merely  to  the  impetus  which  the  diminution  of  utility  gives 
to  variety  of  use,  conditions  might  be  such  as  to  make  the 
act  reasonable. 

The  principle  of  diminishing  utility  is,  in  its  practical 
effect,  much  limited  by  the  substitution  of  a  somewhat 
different  good,  more  easily  obtainable,  for  the  good  better 
fitted  for  the  particular  purpose  but  harder  to  get.)  In  the 
course  of  the  last  century,  cotton  clothing,  because  of  its 
cheapness,  has  displaced  woolen  very  largely,  regardless  of 
the  inferiority  of  the  former  for  many  purposes.  This  is 
but  the  practice  before  mentioned  of  putting  the  added 
units  of  a  large  supply  to  new  uses,  to  which  the  good  whose 
use  is  thus  extended  is  of  course  less  well  adapted.  The 
one  process,  or  rather  that  process  from  the  one  point  of 
view,  may  be  called  in-substitution,  and  the  converse  out- 


42   WELFARE  AS  AN  ECONOMIC  QUANTITY 

substitution.  The  effect  of  each  is  to  flatten  the  curve  of 
diminishing  utility,  or  rather  of  comparative  valuation  and 
effective  demand,  at  different  parts  of  its  extent.^ 

But  here  we  are  passing  beyond  our  bounds  and  trespass- 
ing on  the  realm  of  market  valuation.  In  so  doing  we  are 
likely  to  encounter  difficulties  in  relation  to  the  definition 
of  supply  —  for  example,  as  to  whether  different  grades  of 
a  commodity  constitute  different  supplies  —  which  are  not 
of  importance  for  the  consideration  of  the  variation  of 
utility  as  such,  with  reference  to  which  uses  are  ranked 
without  regard  to  a  margin  or  to  an  exchange  or  substitu- 
tion point. 

/  The  absence  of  objective  differences  between  units  is  not 
the  one  necessary  condition  to  their  constituting  one  supply, 
but  only  the  strongest  case.  The  inclusiveness  of  a  supply 
must  depend  upon  economic,  not  upon  physical,  criteria. 
The  homogeneity  of  a  supply  is,  for  certain  purposes,  an 
aspect  of  goods  rather  than  a  hard-and-fast  fact.  If  inter- 
changeability  of  units  is  the  test,  —  and  that  seems  strict 
enough,  —  since  food,  clothing,  and  shelter  are  in  higher 
latitudes  to  some  degree  interchangeable,  they  must  on 
occasion  constitute  one  supply.  The  principle  of  diminish- 
ing utility  is  applicable,  though  only  qualifiedly  applicable, 
to  a  supply  whose  homogeneity  is  anything  but  a  physical 
fact. 

The  principle  of  diminishing  utility  should  apply  for  any 
and  all  goods  in  so  far  as  they  can  be  brought  together 
under  a  homogeneous  conception.  But  all  goods  are, 
through  economic  development,  for  certain  purposes 
homogeneous.  In  terms  of  exchange  value  or  indirect 
utility,  all  goods  are  commensurable;  they  can  be  reduced 
to  a  common  denominator.  Hence  the  increase  of  goods  in 
general  can,  from  this  point  of  view,  be  brought  under  the 
principle  of  diminishing  utility.  Because  he  already  has  so 
much  the  rich  man  would  take  little  or  no  pleasure  in  a  new 
possession  that  might  bring  supreme  joy  to  the  poor  man. 
Increase  of  riches,  if  conceived  homogeneously,  for  ex- 


THE  SCOPE  OF  DIMINISHING  UTILITY         43 

ample,  in  terms  of  money,  means  diminution  of  the  utility 
of  each  successive  unit  for  their  possessor.  Each  thousand 
dollars  added  to  a  man's  possessions  means  less,  subjec- 
tively, as  his  "money"  increases  r  A  nation  that  is  twice  as 
rich  as  it  used  to  be  or  as  is  another  nation  has  not  ipso 
facto  twice  as  much  well-being.  The  fact  that  money  is 
indirectly  the  most  versatile  of  goods,  that  is,  the  best 
adapted  to  serve  all  purposes,  makes  it  in  the  abstract  thor- 
oughly homogeneous.  Even  if  this  broader  sort  of  homo- 
geneity is  also  thinner,  or  has  but  a  conditional  applicabil- 
ity, it  is  nevertheless  highly  significant.  Content  has  been 
sacrificed  for  the  sake  of  extent;  but  for  some  purposes  the 
Jatter  may  be  the  more  important. 

The  utility  of  additions  to  a  private  library,  considering 
a  book  as  merely  a  book,  very  clearly  follows  the  principle 
of  diminishing  utility.  From  this  viewpoint,  it  is  to  be 
measured  in  the  abstract  and  by  the  ratio  of  what  is  ac- 
quired to  what  is  already  possessed,  i.e.,  measured  rela- 
tively rather  than  concretely  and  absolutely.  The  utility 
of  such  an  increment  may  be  considered  merely  posses- 
sively and  existentially.  If  the  books  are  not  easily  thought 
of  under  an  aspect  of  homogeneity  and  as  a  single  supply, 
the  rich  man's  "money"  or  property  certainly  can  be  so 
viewed. 

"Property  is  coming  more  and  more  to  be  abstract  or 
paper  property,  and  this  much  at  least  is  not  merely  cap- 
able of  being  viewed  under  an  aspect  of  homogeneity;  it  is 
homogeneous,  for  it  is  adequately  measured  and  described 
in  dollars.  Such  property,  both  principal  and  income,  is 
mere  purchasing  power.  It  is  thus  conformable  to  all  the 
requirements  for  direct  application  of  the  principle  of  di- 
minishing utility.; 

When  the  man  of  large  means  manages  to  have  his  ex- 
penditures keep  pace  approximately  with  his  income  in 
ways  to  yield  legitimate  utility,  his  great  recourse  is  to 
complementary  utility.1  But  he  is  usually  too  passive  and 
1  Cf.  chap,  ix,  especially  p.  113. 


44   WELFARE  AS  AN  ECONOMIC  QUANTITY 

imitative  in  his  choices  to  make  the  most  of  the  comple- 
mentary relation.  Hence,  though  his  increasing  means 
theoretically  still  continue  to  possess  utility  for  him,  there 
ceases  to  be  any  proportion  between  means  employed  and 
ends  obtained.  Without  the  assistance  of  certain  invidious 
and  anti-social  forms  of  enjoyment,  the  exploitation  of 
socially  unrequited  personal  services,  and  the  bidding-up 
of  the  rare,  including  rare  sites  and  unusual  forms  of  skill, 
it  would  be  difficult  or  practically  impossible  to  continue  or 
to  maintain  an  additional  utility  for  added  increments  of 
riches  and  income,  notwithstanding  the  fact  that  there  is 
theoretically  always  some  possible  resort.  On  a  generaliz- 
able  level,  supposing  expenditures  limited  with  regard  to  a  / 
reasonable  return  for  outlay  and  also  with  regard  to  the 
amount  of  time  required  for  reasonable  spending,  it  may  be! 
said  that  there  is  no  power  economically  to  use  indefinitely  j 
larger  and  larger  amounts  of  wealth  for  private  and  per- 
sonal ends.  ! 

There  is  no  escape  from  the  conception  of  homogeneity 
that  underlies  this  idea  of  the  diminishing  utility  of  the 
dollar  through  assuming  that  a  supply  satisfies  always  but 
one  and  the  same  want.  We  have  seen  what  a  variety  of 
uses  are  included  under  such  a  single  want.  Moreover,  if 
we  look  further,  we  shall  see  that  the  unity  of  the  want  is 
itself  but  a  reflection  of  the  unity  of  some  kind  of  good. 
One  want  is  linguistically  rather  than  psychically  distinct 
from  other  wants.  If  we  really  get  on  psychological  ground, 
we  find  that  all  wants  are  subjectively  unitary  as  phases  of 
one  comprehensive  desire  for  the  means  of  satisfaction  or 
happiness.1  But  the  environment  requires  the  specializa- 

1  Note  on  the  commensur ability  of  all  sorts  of  satisfaction.  All  utilities 
are  commensurable  with  each  other  because  all  satisfactions  are  thus 
commensurable.  But  it  makes  no  particular  difference  whether  we  rea- 
son from  the  subjective  to  the  objective  term,  or  vice  versa.  All  wants  are, 
therefore,  in  the  last  analysis,  that  is,  as  central  feeling  or  affection, 
subjectively  unitary  or  of  one  kind.  They  are  commensurable  one  with 
another  and  can,  on  occasion,  be  given  a  definite  rank  and  order  of  pref- 
erence. That  some  of  the  positions  in  this  scale  may  be  separated  by  wide 


THE  SCOPE  OF  DIMINISHING  UTILITY        45 

tion  of  desire  and  also  particular  thought  and  action  with 
reference  to  a  succession  of  concrete  things  "wanted." 

and  permanent  gaps,  with  no  stepping-stones  between,  does  not  affect 
the  essence  of  the  situation,  but  does  explain  the  reluctance  of  some  to 
admit  the  commensurability  of  all  feelings.  That  we  can  assign  no  exact 
value  in  terms  of  measurement  units  to  the  distances  between  various 
points  on  the  scale  is  also  in  principle  unessential. 

A  question  may  arise  also  as  to  the  identification  of  satisfaction  with 
the  pleasant  side  of  central  feeling  or  affection.  It  is  true  the  word  "satis- 
faction" is  used  both  as  referring  to  a  mental  process  and  as  signifying 
something  more  objective  and  various,  that  is,  the  meaningfulness, 
especially  the  enduring  meaningfulness,  to  the  subject,  of  an  event  or 
experience.  But  in  economics  the  term  satisfaction  refers  to  the  stage  of 
consciousness  where  wants  or  the  subjective  aspects  of  wants  are  com- 
mensurable with  each  other.  In  this  sense  satisfaction  is  here  identified 
with  the  psychologist's  pleasantness. 

It  is  not  a  fundamental  objection  that  some  of  our  wants  and  choices 
are  impulsive  or  sensory-motor  rather  than  the  outcome  of  reflective 
judgment,  and  therefore  do  not  refer  back  directly  to  pleasantness-un- 
pleasantness. Desire  is  often  of  this  nature.  The  desirableness  of  some 
things  economic  may  to  some  extent  be  determined  in  this  way  rather 
than  by  the  satisfactions  obtainable.  But  such  desires  are  either  organ- 
ized into  the  reflective  life  of  the  individual,  or  else  the  one  controlled  by 
them,  instead  of  by  desires  for  such  things  as  are  valued  upon  taking 
thought,  is  unreasonable  and  uneconomic,  and  therefore  his  actions  do 
not  conform  to  the  necessary  assumptions  of  abstract  economic  theory. 
Hence,  though  it  is  true  that  the  economic  reactions  of  many  individuals 
are  not  only  not  rational  in  form,  but  are  also  not  reflective  in  method,  and 
are  consequently  no  more  motived  by  anticipated  satisfactions  than  by 
the  desirableness  of  the  objects  sought,  the  position  taken  in  the  text  is 
correct,  psychologically  as  well  as  economically.  Even  for  the  most  rea- 
sonable and  "economic"  of  beings,  many  choices  will,  whether  by  habit 
or  instinct,  be  nearly  or  quite  reflex.  Economic  theory  may  deal  with  all 
acts  and  conduct  as  if  resulting  from  states  of  clear  consciousness  because 
the  reasonable  habitual  or  only  half -conscious  responses  to  stimuli  have 
been  evolved  from  such  as  were  formerly  clearly  conscious,  and  because 
functionally,  that  is  for  economics,  the  two  are  not  essentially  different. 

Valuation,  it  is  true,  is  a  reflective  process,  whether  the  reference  be  to 
marginal  valuation  or  to  the  more  general  valuation  of  uses.  Most  eco- 
nomic acts  are  therefore  not  the  direct  outcome  of  valuation,  though 
economic  conduct  as  a  whole  is  so  motived.  Valuation  is  a  piecemeal 
and  patchwork  affair. 

It  is  only  in  the  fully  conscious  and  reflective  process  of  valuation  that 
comparison  and  commensuration  of  possible  sources  of  satisfaction  take 
a  prominent  part.  But  it  is,  of  course,  not  the  feelings  themselves  that  are 
directly  compared.  The  various  represented  objects  and  situations  are 
tested  by  feeling,  and  so  quantitatively  judged.  We  do  not  weigh  the 
feelings  themselves,  but  with  the  anticipated  feelings  we  weigh  the  things 


46       WELFARE  AS  AN  ECONOMIC  QUANTITY 

Hence  names  are  evolved  for  various  wants.  But  the  dis- 
tinctions are  objective  or  linguistic,  rather  than  psychologi- 
cal or  economic. 

represented  to  the  mind.  Not  calculatingly,  but  by  inspection  and  in- 
tuition, we  feel  the  greater  value  of  this  or  that  object  or  situation. 

The  writer  is  aware  of  the  fact  that  there  are  psychologists  who  reject 
,  the  proposition  that  the  affective  phase  of  mental  processes,  that  is,  feel- 
ings like  pleasantness  and  unpleasantnesses  merely  dual  (plus  and  minus) 
in  quality  and  commensurable  throughout  its  extent,  though  commensur- 
able with  less  facility  where  the  question  is  one  of  determining  the  pleas- 
antness equivalent  of  a  definitely  and  decidedly  unpleasant  experience. 
The  older  pleasure-pain  theory  was  very  crude.  Some  place  for  desires 
that  are  almost  mere  motor  tendencies,  which  offer  chiefly  possibilities  of 
unpleasant  feeling  as  a  result  of  obstruction  or  inhibition,  must  be  made. 
This  point  has  already  been  disposed  of.  For  the  rest,  where  the  psycholo- 
gists disagree,  one  is  permitted  to  make  his  own  choice  between  them. 
The  anti-hedonists  have  no  such  exclusive  possession  of  the  field  as  the 
noise  they  make  may  suggest.  The  contributions  of  the  so-called  English 
schools  to  both  psychological  and  economic  thought  are  still  vital,  though 
not  fashionable,  and  they  are  of  course  subject  to  modification  and  re- 
statement. But  the  economist  need  insist  only  that  all  the  qualities  that 
make  goods  desirable  are,  in  the  last  analysis,  commensurable  with  each 
other  on  the  subjective  plane.  With  psychological  terminology  he  is  little 
concerned. 

Some  anti-hedonism  —  for  present  purposes  it  might  better  be  called 
anti-commensurationism  —  is,  moreover,  discredited  at  its  inception, 
since  it  is  the  product,  not  so  much  of  scientific  study  as  of  an  ethical 
viewpoint  that  wants  to  believe  some  of  our  desires  to  be  absolutely 
different  qualitatively  from  others  and  absolutely  incommensurable. 
That  such  conscious  or  unconscious  "pragmatism"  does  violence  to  fun- 
damental canons  of  scientific  thinking,  it  is  doubtless  useless  to  point 
out.  It  is  perhaps  even  less  useful  to  argue  the  point. 

This  note  may  perhaps  seem  rather  dogmatic  in  tone.  Lack  of  space 
for  fuller  treatment  is  the  excuse.  The  note  is  intended  rather  to  express 
an  opinion  than  to  demonstrate  a  truth.  In  this  spirit,  also,  it  may  be 
well  to  add  that  \;he  writer  is  unable  to  attach  any  ethical  significance 
to  psychological '  hedonism,"  without  regard  to  whether  it  be  thorough- 
going or  qualified.  He  feels  that  ethics  is  concerned  principally  with  the 
problem  of  the  right  relation  between  the  good  of  the  first  person  (x) 
and  that  of  others  (a?i,  x2,  ar3,  etc.),  and  only  secondarily  or  derivatively  — 
through  the  requirement  that  each  z  be  of  a  nature  to  fit  into  the  system 
of  x's  —  with  the  meaning  of  x,  the  good  of  the  individual,  itself .  On  ethi- 
cal subjects  he  finds  himself  most  in  agreement  with  Henry  Sedgwick, 
Methods  of  Ethics. 

As  regards  the  psychological  implications  of  the  above  statement, 
reference  may  be  made  to  Titchener,  Elementary  Psychology  of  Feeling  and 
Attention,  1908,  where  the  controverted  points  concerning  affection  are 
dealt  with  and  disposed  of  in  order  on  a  purely  psychological  plane  and 


THE  SCOPE  OF  DIMINISHING  UTILITY        47 

If,  to  a  considerable  extent,  different  kinds  of  goods  can 
be  interchanged  and  combined  in  a  single  supply,  it  is 
equally  true,  on  the  other  hand,  that  we  need  to  analyze 
and  separate  the  different  elements  of  utility  in  a  single 
good  or  a  single  supply.  In  a  single  concrete  good  there 
may  often  be  distinguished  several  quite  different  utilities, 
that  is  to  say,  power  to  satisfy  distinct  desires  that  might 
find  satisfaction  in  separate  goods.  1  A  watch  may  give 
satisfaction  because  of  its  reliability  as  a  time-keeper, 
because  of  the  beautiful  material  and  decoration  of  the 
case,  because  it  is  an  evidence  of  the  wealth  and  social 
standing  of  its  possessor,  and  because  it  is  a  reserve  that 
can  be  quickly  realized  upon  in  case  of  urgent  necessity. 
The  utility  of  the  watch  has  a  collective  reference  to  the 
benefit  receivable  from  all  these  uses. 

The  diminishing  utility  of  a  supply  of  watches  will  be  due 
to  the  applicability  of  the  law  to  the  different  elements  of 
utility  brought  together  in  each  watch.1  Since  the  initial 
utility  and  the  rates  of  diminution  are  different  for  the 
different  elements,  and  since  the  ratio  of  the  significance 
of  each  element  to  that  of  the  others  differs  for  different 
tastes  and  means,  a  difference  in  ability  to  pay  will  express 
itself  by  a  sacrifice  of  more  of  the  decorative  utility  than  of 
the  time-keeping  utility.  Conversely,  greater  means  find 
expression  in  the  demand,  not  merely  for  more  articles,  but 
especially  for  new  qualities  and  new  utilities  in  the  articles 
bought,  even  when  they  remain  commercially  of  the  same 
kind.  Diminishing  utility  is  inevitably  obscured  under 
such  circumstances,  where  the  purchaser  chooses  articles 
with  reference  to  adding  new  utilities  to  them,  instead  of 
increasing  his  supply  of  the  goods.  It  might  be  said  that 
the  kind  of  utility  last  added  —  for  there  may  be  no  in- 

where  a  conclusion  is  arrived  at  that  is  quite  in  accord  with  the  views 
here  expressed,  but  of  course  without  ulterior  economic,  or  other  func- 
tional, reference.  See  also  O.  Kiilpe,  article  Gefiihl,  Handworterbuch  der 
Naturwissenschaften,  vol.  iv  (1913),  p.  678. 

1  For  a  parallel  discussion  of  this  subject  from  a  different  point  of  view, 
fcf .  Clark,  Distribution  of  Wealth,  pp.  235-45. 


48   WELFARE  AS  AN  ECONOMIC  QUANTITY 

crease  in  the  number  of  goods  —  is  the  marginal  utility. 
But  are  the  others  then  the  super-marginal  stages  of  the 
diminution  of  utility? 

The  use  of  the  watch  as  an  illustration  is  not  favorable 
to  simplicity  of  explanation,  since  the  time-keeping  and 
other  utilities  embodied  are  sold  in  such  large  "chunks'* 
that  it  appears  as  if  there  is  for  each  particular  quality  only 
one  point  or  level  of  utility,  varying  with  the  tastes  jand 
circumstances  of  the  individual,  instead  of  a  curve. ^But) 
the  discontinuous  succession  of  the  units  of  a  supply  only/ 
obscures  the  principle  of  diminishing  utility  without  affect-] 
ing  its  validity  as  an  abstract  explanatory  principle. 

The  difficulty  with  discontinuity  is  occasioned  by  the 
fact  that  subjective  economics  is  under  the  necessity  of 
taking,  for  the  most  part,  the  point  of  view  of  the  individ- 
ual. The  combination  of  such  utilities  into  a  social  curve  of 
diminishing  utility  —  whose  relation  to  the  demand  curve 
will  be  noticed  presently  —  does  not  alter  the  principle 
involved,  while  it  does  make  a  curve  of  the  points.1  The 
regular  diminution  of  utility  as  a  social  phenomenon  is 
what  is  of  most  significance  for  economics.  It  is  rarely  that 
a  single  point  is  given,  furthermore,  even  for  the  individual, 
at  least  if  he  is  the  economic  representative  of  a  complete 
private  economy,  that  is,  a  family.  The  head  of  a  family 
needs  to  buy  or  own  several  units  of  time-keeping  utility, 
or  even  several  watches.  Even  mere  duplication  may  be  a 
convenience.  Though  a  person  can  use  but  one  umbrella  at 
a  time,  it  is  decidedly  convenient  to  possess  more  than  one. 

The  relation  of  diminishing  utility  to  demand  is  largely  a 
matter  of  the  summation  of  utility  curves.  The  transition 
from  the  normal  diminishing  utility  curve  for  an  individual 
to  social  demand  curves  is  thus  in  part  a  mathematical 
problem.  If  the  normal  law  holds  for  summated  curves,  it 
acquires  correspondingly  better  standing  practically.2 

'  1  Cf.  Jevons,  Theory  of  Political  Economy,  2d  ed.,  pp.  96-98. 

2  The  rectangular  hyperbola  appears  to  be  of  great  significance  also  in 
relation  to  the  interpretation  of  other  economic  phenomena,  notably  those 
of  the  status  of  the  distribution  of  wealth. 


THE  SCOPE  OF  DIMINISHING  UTILITY.       49 

But  first,  it  may  be  asked,  how  is  the  transition  from  a 
diminishing  utility  to  a  demand  curve  effected  in  the  case 
of  an  individual?  The  diminishing  utility  curve  measures 
want,  which,  iti  order  to  be  effective  as  demand,  must  be 
supported  by  purchasing  power.  But  this  is  simply  a  mat- 
ter of  determining  what  is  the  utility  equivalent  of  a  mar- 
ginal dollar.  This  quantity  of  utility  will  be  constant  for 
any  comparisons  and  judgments  the  individual  wishes  to 
make.  Hencej/the  individual's  demand  curve  is  simply  his 
utility  curve  with  its  vertical  scale  translated  into  terms  of  J 
dollars./  A  certain  length  of  ordinate  represents,  not  merely 
a  certain  quantity  of  utility,  but  also  a  stated  monetary 
equivalent.  Of  course  as  a  demand  curve  it  will  be  raised 
or  lowered  by  a  change  in  the  circumstances,  or  the  pur- 
chasing power,  of  the  individual.  But  that  does  not  affect 
the  mathematical  character  of  the  curve  in  the  least,  but 
merely  changes  its  scale. 

Some  one  may  question  whether  the  upper  reaches  of  the 
curve,  the  higher  utilities,  should  be  translated  into  money 
in  quite  the  same  way  as  those  near  the  margin,  since, 
it  may  be  alleged,  these  uses  will  not  be  valued  in  money 
till  they  become  marginal,  and  then  money  will  be  scarce. 
But  the  equation  of  utility  and  money  supposes  the  indK 
vidual's  purchasing  power  unchanged,  j  However  difficult  \ 
to  apply,  and  of  however  little  commercial  interest  the  \ 
result  may  be,  these  high  and  largely  super-marginal  utili- 
ties must  be  measured  by  the  same  standard,  both  as  to 
utility  and  money,  as  the  marginal  ones,  in  order  that  the 
curve  be  correctly  conceived.  In  fact,  however,  we  should 
not  suppose  that  the  individual's  purchasing  power  is  being 
reduced  by  subtraction  from  a  non-replenished  stock  of 
money  by  reason  of  whatever  he  buys  or  consumes.  He  has 
income  as  well  as  expense,  so  his  supply  of  money  will  not 
be  depleted  by  economically  well-considered  expenses,  nor 
the  form  of  his  demand  curve  affected.  His  utility  and  de- 
mand curves  will  themselves  take  account  of  the  fact  that 
he  is  spending  from  income,  and  also  providing  by  his 


50   WELFARE  AS  AN  ECONOMIC  QUANTITY 


expenditures  partly  for  future  uses.  If  his  circumstances 
change,  for  example,  by  the  loss  or  the  inheritance  of  a  for- 
tune, of  course  the  scale  of  his  demand  curve  will  change, 
but  that  is  a  matter  already  disposed  of. 

The  application  of  the  normal  law  to  the  social  diminu- 
tion of  demand  is  not  so  simple  a  matter.  It  is  a  necessary 
postulate  that  several  normal  curves  summated  be  a  simi- 
lar normal  curve,  that  is,  a  rectangular  hyperbola.  But  it  is 
a  demonstrable  proposition  that  a  curve  constituted  by  the 
vertical  superposition  of  an  indefinite  number  of  rectangular 
hyperbolse,  in  such  a  way  that  all  the  axes  of  ordinates  co- 
incide, and  that  the  area  subtended  by  the  resultant  curve 
(i.e.,  between  it  and  the  axis  of  abscissae)  and  lying  between 
any  two  ordinates  is  the  sum  of  the  areas  between  the 
corresponding  ordinates  of  the  constituent  curves,  is  itself 
a  rectangular  hyperbola.1 

1  Given:  P1  and  P2  any  two  points  on  a  rectangular  hyperbola  xy  =  c ; 
Qi  and  Q2  any  two  points  on  another  rectangular  hyperbola  xy  =  k  (re- 

F  ferred  to  same  axes  of  coor- 

dinates) ;  Mv  a  point  whose 
abscissa  is  the  same  as  that 
of  P!  or  Qt  and  whose  ordi- 
nate  is  equal  to  the  algebraic 
sum  of  the  ordinates  of  Pj. 
and  Qv  that  is 

andM2,  a  point  similar  to  Mr 
To  prove  that  the  coordi- 
nates of  M j  and  M2  satisfy 
the  equation  of  a  rectangular 
hyperbola. 

Proof:  The  equations  of 
condition  for  the  points  Plt 
-X    P2,  Qi,  and  Q2  are 


Since 


x1yl  =  c 
xi  =  xi 

x\yi  =  k 


and  i 
k 


THE  SCOPE  OF  DIMINISHING  UTILITY        51 

It  is,  of  course,  the  area  subtended  by  the  curve  that  re- 
presents the  quantity  of  utility  or  of  demand.  The  method 
and  results  of  summating  these  areas  constitute  the  sub- 
ject under  consideration.  In  the  case  just  mentioned  they 
are  added  by  way  of  the  ordinates.  Such  addition  of  util- 
ity or  demand  curves  raises  a  question  as  to  what  then 
happens  to  the  significance  of  a  unit  of  the  horizontal 
and  vertical  scales,  respectively. 

Price  is  measured  along  the  vertical  axis.  This  scale 
remains  the  same  for  the  summated  as  for  the  component 
curve.  But  if  we  should  add  a  number  of  curves,  the  level 
of  the  resultant  curve  might  be  raised  to  an  inconvenient 
height,  hence  it  may  be  well  to  reduce  the  scale  or  plot  the 
resultant  curve  on  a  smaller  scale  than  the  component 
curves,  perhaps  by  dividing  the  summated  scale  by  the  num- 
ber of  component  curves.  This  will  give  the  resultant  curve 
a  mean  position  among  the  curves  summated.  If  we  wish  to 
regard  the  former  as  a  mean  of  the  latter,  we  can  con- 
veniently consider  it  as  drawn  to  the  same  scale.  Mathe- 
matically the  summated  curve  as  above  discussed  and  the 
mean  curve  are  in  effect  the  same.  They  have  the  same 
equation,  for  each  of  the  ordinates  of  the  mean  curve  is 
some  aliquot  part  of  the  corresponding  ordinate  of  the 
summated  curve. 

Next  to  be  considered  is  the  question  as  to  what  happens 
to  the  horizontal  scale,  along  which  are  represented  the 

By  hypothesis       yf  =  y1  +  y^  2/2"  =  y2  +  y2' 


__       •  _  _       i         < 

~^      *i  ~~  x~2     aT2 

Clearing  of  fractions  ,1 

Zi2/i"  =  c  +  &  xfli"  =  c  +  k 

Since  the  products  of  the  coordinates  of  the  points  Ml  and  M2  are  con- 
stant and  equal  to  c  +  Jc,  it  follows  that  M  :  and  M2  are  two  points  on  a 
rectangular  hyperbola  whose  equation  is 

xy  =  c+  k 

L.  H.  L. 


52   WELFARE  AS  AN  ECONOMIC  QUANTITY 

units  of  potential  supply.  The  measuring  of  a  unit  of  this 
scale  is  changed  by  direct  summation,  so  that  a  unit  that 
before  represented  but  one  unit  of  commodity  now  repre- 
sents as  many  as  there  are  curves  added  together.  But  of 
course  if  we  use  the  mean  instead  of  the  sum  of  the  ordi- 
nates,  the  horizontal  scale  retains  the  same  significance  for 
the  resultant  curve  as  for  its  constituents. 

It  is  possible  to  deal  with  the  units  of  the  horizontal 
scale  in  a  different  way  if  at  the  same  time  we  change  the 
meaning  of  a  unit  of  the  vertical  scale.  We  may  add  the 
demand  areas  by  way  of  the  abscissae  instead  of  the  ordi- 
nates.  That  the  resultant  curve  will  be  a  rectangular 
hyperbola  is  obvious  if  we  note  the  fact  that  this  species 
of  curve  is  symmetrical  with  reference  to  both  its  axes,  that 
is,  x  and  y  are  interchangeable  in  the  equation  (xy  =  c) 
of  a  rectangular  hyperbola.  In  unmathematical  terms,  the 
arm  lying  near  to  the  axis  of  ordinates  has  the  same  relation 
to  this  axis  that  the  other  arm  has  to  the  axis  of  abscissae. 
Hence  what  holds  of  the  summation  of  ordinates  and  of 
areas  subtended  between  the  curve  and  the  axis  of  ab- 
scissae holds  also  of  the  summation  of  abscissae  and  of  the 
similarly  subtended  areas.  What  is  proved  of  the  rectangu- 
lar hyperbola  in  relation  to  one  axis  is  proved  in  relation 
to  the  other. 

The  next  question  is  what  is  the  meaning  in  terms  of 
economics  of  this  addition  of  abscissae.  The  significance  of 
a  unit  of  both  the  vertical  and  the  horizontal  scales,  in  terms 
of  price  and  of  potential  supply,  respectively,  remains  the 
same.  The  area  of  the  resultant  curve  is  of  course  extended 
in  proportion  to  the  number  and  extent  of  curves  summated. 
The  demand  at  ordinary  prices  is  of  course  much  prolonged. 
But,  if  desired,  a  mean  curve  can  be  used  in  this  case  as  it 
is  above  where  summation  is  effected  by  way  of  the  ordi- 
nates. In  any  case  the  form  of  the  curve  remains  the  same. 
But  it  may  be  desirable  to  make  some  allowance  for  the 
fact  that  the  upward-extending  arm  may  not  be  more  than 


THE  SCOPE  OF  DIMINISHING  UTILITY        53 

partially  represented  in  the  demand  schedules  of  some  con- 
sumers. 

The  fact  referred  to,  namely,  that  the  initial  point  of  the 
supply  does  not  necessarily  coincide  with  the  axis  of  ordi- 
nates, makes  a  qualification  necessary.   The  extension  of  \ 
demand  brings  in  new  users  whose  initial  demand-price  / 
may  be  so  low  that  they  are  ordinarily  not  purchasers  at  / 
all.  This  would  mean  in  practice  some  distortion  by  way 
of  a  flattening  of  the  lower  portion  of  the  curve. 

On  the  other  hand,  the  demand  curve,  unlike  the  utility 
curve,  takes  account  of  the  price  that  the  consumer  is  will- 
ing to  pay.  Ordinarily,  this  is  substantially  only  money. 
But  if  the  price  is  low  enough,  other  costs  come  into  con- 
sideration. These  have  been  discussed  in  the  preceding 
chapter  under  the  name  of  "neglected  costs."  They  tend 
to  cause  the  lower  end  of  the  demand  curve,  as  expressing 
willingness  to  purchase,  to  drop  rather  sharply  and  then  ; 
abruptly  terminate. 

Another  possibility  remains  to  be  considered.  The  above 
discussion  assumes  that  the  axes  of  ordinates  coincide  with 
one  another  as  well  as  the  axes  of  abscissae.  Of  course  the 
axes  of  abscissae  will  coincide,  since  the  zero-price  line  has 
the  same  limiting  relation  to  all  demand  curves. 

But  suppose  the  axes  of  ordinates  of  several  curves  do 
not  coincide?  This  would  mean  that  at  about  ordinary 
prices  the  rate  of  diminution  of  demand  would  be  compara- 
tively rapid  in  one  curve  and  comparatively  slow  in  an- 
other, the  one  arc  being  nearer  the  axis  of  ordinates  than 
the  other.  But  this  situation  does  not  prevent  summating 
the  curves  with  reference  to  either  of  their  axes  or  any  other 
chosen  axis.  The  abscissae  of  each  curve  bear  such  a  rela- 
tion to  one  another  as  to  constitute  a  rectangular  hyper- 
bola. Add  the  two  sets,  and  the  result  is  a  rectangular 
hyperbola.  For  the  rest  we  need  only  to  know  how  the 
significance  of  the  units  of  the  scales  is  affected.  The  fact 
that  some  of  the  upper  reaches  of  some  of  the  curves  may 


54       WELFAEE  AS  AN  ECONOMIC  QUANTITY 

be  only  hypothetical  merely  distorts  that  portion  of  the 
realized  demand  curve,  but  not  in  a  way  to  affect  its  fun- 
damental characteristics. 

For  the  benefit  of  the  reader  who  is  little  inclined  to 
trust  himself  to  mathematical  reasoning,  or  who  may  feel 
that  we  have  narrowed  our  premises  too  much  to  arrive  at 
a  conclusion  of  practical  value,  it  should  be  said  that  the 
demonstration  that  the  individual  utility  curve  is  a  rect- 
angular hyperbola  was  developed  without  thought  of  any 
ulterior  relation  to  the  problem  of  combining  utility  curves 
to  make  social  demand  curves.  It  should  be  noted  also  that 
the  practical  value  of  the  above  discussion  is  not  conditioned 
by  the  curves  combined  being  exactly  rectangular  hyper- 
bolae. The  result  is  in  any  case  a  curve  showing  "diminu- 
tion at  a  diminishing  rate,"  though  with  various  possibili- 
ties of  distortion  from  the  true  form  of  the  rectangular 
hyperbola.  /The  essential  point  is  that  the  summation  oJ 
individual  utility  or  demand  curves  gives  a  social  demand, 
curve  of  the  same  general  character  ,j  The  addition  of  cor- 
responding terms  of  any  two  descending  series  with  dimin- 
ishing rates  of  decline  always  gives  another  descending 
series  having  this  same  character.1  The  compound  curve 
of  social  demand  will  show  the  same  characteristics  as  the 
simple  utility  curve. 

By  "diminution  at  a  diminishing  rate  "  in  this  connec- 
tion, as  throughout  this  essay,  is  meant  diminution  such 
that  the  absolute  differences  between  successive  steps  form 
a  descending  series.  In  other  words,  the  rate  of  diminution 
is  conceived  absolutely,  not  relatively,  though  the  mathe- 
matician would  mean  by  a  constant  ratio  (rate)  one  that 
is  relatively  constant,  and  therefore,  in  the  present  sense 
and  case,  diminishing,  while  a  constant  ratio,  in  the  pres- 
ent sense,  is  what  the  mathematician  would  call  a  con- 

1  The  mathematical  proposition  to  this  effect  is  found,  for  example,  in 
Hall  and  Knight's  Higher  Algebra,  4th  ed.,  1899,  "Convergency  and 
Divergency  of  Series,"  art.  288,  p.  234. 


THE  SCOPE  OF  DIMINISHING  UTILITY        55 

slant  difference.  The  terms  of  a  series  exhibiting  a  dimin- 
ishing rate,  in  the  present  sense,  would  yield  what  the 
mathematician  calls  variable  differences  with  each  differ- 
ence smaller  than  the  preceding  one. 

Our  conclusion  is  thoroughly  practical.  For  a  discussion 
•  of  the  course  of  the  diminution  of  utility  or  demand  we 
1  need  not  be  punctilious  as  to  whether  we  refer  to  the  indi- 
|  vidual  or  to  society  at  large.   But  we  should  not  forget 
that  the  principle  of  diminution  at  a  diminishing  rate  is 
abstract  in  both  cases  and  relates,  as  we  shall  later  see,  to 
but  one  kind  of  utility.  I 

/  To  return  to  the  question  of  purchasing  power  —  a  sum-\ 
[mated  or  social  curve  of  demand  is  composed  of  curves  ; 
expressive  of  a  great  variety  of  conditions  in  this  respect./ 
This  makes  no  difference  as  regards  the  form  of  the  curve 
considered  as  a  result  of  the  form  of  the  individual  demand 
curve.  It  does,  however,  make  a  great  difference  as  re- 
gards the  social  significance  of  the  altitude  of  an  ordinate, 
marginal  or  other.  Quantity  of  utility  cannot  be  read  back 
from  such  a  curve.  A  given  point  on  the  curve  does  not 
represent  any  definable  quantity  of  utility.  We  might  as  j 
well  try  to  obtain  a  sum  of  money  by  counting  the  pieces 
in  a  pile  composed  in  various  proportions  of  all  the  coins 
of  all  the  currencies  of  the  world  as  to  attempt  to  deter- 
mine the  utility  of  an  article  merely  by  means  of  the  price 
it  fetches.  It  is  one  thing  to  say  that  the  diminishing 
utility  curves  of  different  individuals  in  relation  to  the  same 
kind  of  good  can  be  translated  into  demand  curves  and  sum- 
mated  to  constitute  a  social  demand  curve,  and  another 
thing  to  say  that  the  social  demand  curve  can,  as  regards 
the  realized  utility  corresponding  to  the  various  steps  in  its 
quantitative  gradation,  be  treated  in  quite  the  same  way 
as  the  utility  curve  (which  is  practically  identical  with  the 
demand  curve)  of  an  individual.  Differences  of  purchasing 
power  greatly  affect  the  translation  of  the  social  variation 
of  utility  into  a  demand  curve,  while  the  purchasing  power 


56       WELFARE  AS  AN  ECONOMIC  QUANTITY 

of  an  individual  can  be  assumed  to  remain  constant,  and 
therefore,  his  demand  curve  is  not  affected  like  the  social 
demand  curve.1  The  relation  of  riches  and  poverty,  that  is, 
of  the  quantity  of  economic  means,  to  the  significance  of 
marginal  utility,  as  that  which  is  back  of  effective  de- 
mand, is  touched  upon  directly  and  indirectly  below  in 
treating  of  complementary  utility,  transputed  utility,  and 
finally,  by  way  of  what  is  practically  a  summary,  in  the 
concluding  chapter. 

To  return  to  the  individual  diminishing  utility  curve 
jwith  reference  to  dealing  with  a  point  suggested  by  the 
watch  illustration  used  some  pages  back  —  let  us  consider 
the  embodiment  of  utility,  for  example,  time-keeping  util- 
ity, in  several  articles  commercially  described  as  of  differ- 
ent kind,  or  put  into  different  categories  of  goods.  This 
brings  up  another  phase  of  the  application  of  diminishing 
utility,  that  is,  to  elements  of  utility  instead  of  to  con- 
crete goods.  The  analysis  ought  to  pursue  a  given  utility 
through  different  supplies.  The  comparisons  and  decisions 
of  the  purchaser  in  the  market  are  seen  to  be  thus  analytical 
,  in  following  one  kind  of  utility  through  various  supplies. 
More  or  cheaper  watches  make  necessary  fewer  clocks,  and 
cheaper  meat  less  bread.  Of  course  this  is  a  phase  of  sub- 
stitution. By  disregarding  the  distinction  between  inter- 
change of  units  of  the  same  supply  and  substitution  from 
a  different  supply,  this  analytical  point  of  view  both  sim- 
plifies and  makes  more  difficult  the  conception  of  diminish- 
ing utility,  jit  simplifies  the  conception  by  making  it  inde- 
pendent of  relatively  accidental  objective  likenesses  or 
differences  in  goods.  At  the  same  time  it  requires  more 
abstract  thinking,  and  also  raises  questions  as  to  the  nature 
and  importance  of  substitution.  But  substitution  applies 
only  for  goods  and  not  for  their  abstract  utility-elements. 

The  law  of  diminishing  utility  has  direct  reference  only 
to  the  movement  up  or  down  of  the  marginal  degree  of 
utility.  It  would  not  be  improper  to  insert  the  word 


THE  SCOPE  OF  DIMINISHING  UTILITY        57 

/"marginal"  before  "utility"  in  the  statement  of  this  law. 

!  The  range  of  movement  of  the  margin  is  of  course  quite 

;  small  in  the  practical  experience  of  an  individual  so  long 

as  his  circumstances  are  not  greatly  changed.    This  may 

easily  lead  to  the  supposition  that  the  unknown  intra- 

marginal  region  is  a  sort  of  ghost-land  inhabited  by  no  real 

super-marginal  utilities  but  prepared  on  occasion  to  erect 

new  and  higher  marginal  utilities  like  stockades  to  protect 

against  intrusion.   This  is  not  the  writer's  view,  however 

inexact  the  quantitative  determination  of  the  degree  of 

1   super-marginal  utilities  may  be  admitted  to  be. 

The  doctrine  of  diminishing  utility,  if  it  is  to  be  given  its 
due  scope  as  an  explanatory  principle,  requires  abstraction. 
The  underlying  law  of  utility  variation  must  naturally  be 
abstract.  Its  application  is  therefore  to  be  qualified  with 
reference  to  what  is  left  out  of  account.  The  "other 
things"  that  are  not  always  "equal"  are  not  to  be  dis- 
missed as  mere  disturbing  factors.  From  them  and  for 
them  are  to  be  sought  new  phases  and  independent  prin- 
ciples of  the  variation  of  utility,  to  the  consideration  of 
which  we  shall  shortly  come,  especially  in  the  chapters 
on  the  complementary  relation. 


CHAPTER   V 

PROCESSIVE  UTILITY  AND   EXISTENTIAL  UTILITY 

WHATEVER  may  have  been  the  original  meaning  of  the 
j  word,  "consumption"  has  now  come  to  have  as  much  re- 
ference to  enjoyment  of  utility  as  to  the  usual  material 
consequence  of  that  enjoyment,  which  is  the  destruction 
of  the  utility.  The  subjective  effect  is  in  fact,  notwithstand- 
ing its  neglect  by  economists,  of  the  greater  intrinsic  im- 
portance.1 Consumption  may  therefore  be  presumed  to 
have  these  two  phases,  enjoyment  of  utility  and  destruction 
of  utility.  To  what  is  merely  presumptive  there  are  of 
course  exceptions  —  in  this  case  of  very  great  significance. 
I  It  may  well  be  just  the  objective  and  market  consequences 
of  consumption  that  have  given  it  its  practical  socio-eco- 
nomic importance.  If  goods  could  serve  the  purposes  of  con- 
sumption forever  without  subtraction  from  their  efficiency, 
production  would  be  very  different  from  what  it  is.  It  would 
be  an  exclusively  dynamic  phenomenon,  instead  of  being 
the  chief  subject-matter  of  static  economics.  Production 
under  present  circumstances  assumes  not  only  that  wants 
recur,  but  also  that  most  goods  sooner  or  later  lose  the 
qualities  by  which  they  satisfy  these  wants.  The  usual 

material  consequences  of  consumption,  even  though  they 
r  ~    """"" 

1  Say  defines  consumption  as  essentially  the  loss  of  value  that  is  its 
" invariable  and  inevitable  consequence"  (Treatise  of  Political  Economy, 
book  in,  chap.  II,  pp.  351-52  of  Prinsep's  translation,  1827).  To  Senior 
"the  making  use  of  a  thing"  is  the  essence  of  consumption,  the  destruc- 
tion of  utility  being  unintended  and  generally,  but  not  necessarily,  inci- 
dental (Political  Economy,  pp.  54-55).  The  latter's  conception  is  now 
the  prevailing  one.  The  views  of  both  of  these  writers  are  especially 
significant  because  it  is  to  them  we  owe  "utility"  as  a  technical  term  of 
economics.  To  Say,  also,  we  owe  the  traditional  fourfold  division  of 
economics  which  constitutes  consumption  one  great  branch. 


PROCESSIVE  AND  EXISTENTIAL  UTILITY      59 

are  not  the  necessary  consequences,  are  thus  basic  for 
production.  Rate  of  destruction,  or  "rate  of  (objective) 
consumption,"  is  also,  obviously,  a  direct  limitation  on 
enjoyment.  Hence  it  is  not  inexplicable  that  economists 
have  made  so  little  of  what  should  be  the  central  topic  of 

i;  a  study  of  consumption,  that  is,  enjoyment. 

There  are  goods  whose  "rate  of  (objective)  consumption  " 
is  zero.  Gems  are  familiar  examples.  The  fact  that  means 

/  of  enjoyment  may  remain  intact  while  continuing  to  serve 
their  purpose,  even  if  this  state  of  things  cannot  go  on  for- 
ever, must  have  much  importance  for  social  economy.  The 
mistaken  assumption  that  the  enjoyment  of  such  goods 
involves  their  destruction  is  due  partly  to  their  occasional 
loss,  which  is  a  different  matter,  partly  to  the  depreciation 
of  their  utility  through  obsolescence.  Goods  that  endure 
cease  to  be  adapted  to  changing  wants,  and  the  supply, 
owing  to  the  dynamic  character  of  society,  if  for  no  other 
reason,  ceases  to  be  adequate  in  amount.  There  is  no  ob- 
jective cost  attached  to  the  keeping  and  use  of  such  goods, 
no  impairment  of  objective  capacity  to  satisfy,  though  it  is 
true  an  "investment"  in  consumption  goods  whose  utility 
and  value  remain  constant  may  be  said  to  cost  "interest," 
or  their  exclusive  possession  may  be  said  to  involve  the 
consumption  of  "time  value." 

If,  instead  of  being  very  exceptional,  utilization  without 
impairment  of  utility  were  the  rule  for  all  goods,  the  uses 
of  a  good  once  created  would  be  or  tend  to  become  practi- 
cally free.  If  production  were  continued,  the  goods  them- 
selves would  tend  to  be  free.  Of  course  these  suppositions 
are  contrary  to  fact,  although  the  instinct  of  workmanship 
is  a  true  cause  that  would  continue  to  be  operative  where 
the  commercial  value  of  the  product  no  longer  offered  any 
reward  for  productive  effort.  The  situation  imagined  is 
purely  hypothetical  and  of  interest  only  as  presenting  the 
extreme  case,  not  of  mere  diminishing,  but  of  diminished, 
marginal  utility.  Some  approach,  though  rather  remote, 


60   WELFARE  AS  AN  ECONOMIC  QUANTITY 

to  such  a  condition,  however,  can  be  seen  in  the  case  of  the 
uses  of  public  art  collections,  and  of  some  very  permanent 
public  constructions  where  amortization  of  investment  has 
been  affected.  That  such  diminished  or  low  marginal 
utility  means  small  utility  would  be  an  entirely  unwar- 
ranted inference.  On  the  contrary,  marginal  utility  is  low 
Ionly  because  supply,  that  is,  the  supply  of  uses  on  the  spot 
in  question,  is  large.  Total  utility  is  correspondingly  great 
and  average  utility  need  not  be  small. 

The  destruction  of  utility,  however,  is  in  many  cases 
necessary  to  enjoyment.  It  is  a  part  of  the  consumer's 
end  and  is  clearly  seen  to  be  such.  In  this  type  of  consump- 
tion, which  is  so  much  the  more  common  as  to  contribute 
the  most  insistent  element  to  the  conception,  destruction 
of  utility  is  a  part  of  the  process  upon  which  enjoyment 
depends.  This  is  processive  consumption.  Its  objective 
counterpart  is  processive  utility.  Food  is  typical  of  the 
tclass  of  processive  utilities.  I  But  the  shoe-sole  that  is 
worn  out  by  use,  or  the  display  of  fire-works  that  is  en- 
joyed only  as  a  process,  are  equally  good  illustrations. 
There  is  in  such  cases  a  causal  connection  between  the 
destruction  of  the  utility  and  the  enjoyment  or  consump- 
tion of  the  good. 

The  marble  statue  is  an  example  of  an  opposite  type  of 
I  utility,  which  we  have  named  existential.  This  is  enjoyed 
j  by  reason  of  the  existence  and  presence  of  the  good.1  Man 
needs  for  his  enjoyment  of  it  no  processes  or  changes  in  it  J 
His  action  upon  it  has  reference  only  to  preserving  or  in- 
tensifying its  utility.  Processes  in  the  object  destructive 
of  its  existential  utility  may  occur;  if  they  are  not  related 
to  the  enjoyment  of  the  good  the  nature  of  the  utility  is 
not  the  less  existential.  -There  is  here  no  causal  connec- 
tion between  enjoyment  and  the  destruction  of  utility.  The 
object  of  enjoyment  may  be  "a  joy  forever.'\ 

1  There  is  a  certain  analogy  with  Hermann's  conception  of  Nutzkapi- 
tal,  Staatsmrtschaftliche  Untersuchungen,  2.  Aufl.,  1870,  p.  632. 


PROCESSIVE  AND  EXISTENTIAL  UTILITY      61 

Objects  of  sesthetic  feeling  in  a  broad  sense  (not  merely 
objects  of  art)  are  the  most  available  examples  of  existen- 
tial utility. ) All  durable  goods  should,  and  usually  do,  make 
this  aesthetic  appeal.  They  are  enjoyed  for  themselves,  and 
not  merely  for  their  material  effects.  They  are  effective  for 
satisfaction  by  reason  of  their  existence'and  presentation 
apart  from  any  destructive  use.|  If  there  is  such  destruc- 
tion, it  is  accidental,  or  else  incidental  to  the  exploitation 
of  another  kind  of  utility.  Porcelain,  bric-a-brac,  personal! 
ornaments,  precious  stones,  and  substantial  furniture  for! 
the  home  possess,  in  the  main,  existential  utility.  Most 
of  the  materials  of  construction  of  a  house  have  this  char- 
acter, while  other  parts  wear  out,  though  very  slowly. 

The  general  principles  determining  the  distinction  be- 
tween processive  and  existential  utility  are  simple.  In  the 
former,  deterioration  of  utility  is  proportioned  to  the  ap- 
plication of  the  good  to  the  production  of  satisfaction. 
The  utility  in  question  may  be  entirely  destroyed  by  a 
single  act  of  consumption  or  it  may  yield  a  series  of  satis- 
factions.^ Deterioration  of  existential  utility,  on  the  other 
hand,  is  in  some  cases  entirely  absent,  and  in  no  case  is  it 
directly  related  to  use  and  enjoyment  or  their  result. 
There  may  be  deterioration,  usually  extending  over  con- 
siderable time.  It  may  also  be  regular,  but  if  so  it  is  in  pro- 
portion to  time  and  not  to  usef  Existential  utility  does  not 
contain  the  seeds  of  its  own  destruction.  It  is,  however, 
conditioned  by  the  durability  of  the  object  enjoyed. 

The  application  of  these  principles  in  distinguishing  the 
two  kinds  of  utility  in  the  concrete  is  not  a  simple  matter. 
It  requires  much  use  of  analysis  and  abstraction.  It  is 
chiefly  with  reference  to  the  variation  of  utility  —  which 
is  the  main  external  aspect  of  the  economy  of  utility,  but 
not  exhaustive  of  the  significance  of  the  distinction  in 
question  —  that  we  are  here  concerned. 

The  distinction  between  processive  and  existential  util- 
ity is  not  exactly  parallel  with  that  between  perishable 


62       WELFARE  AS  AN  ECONOMIC  QUANTITY 

and  durable  goods.  I  Economically  perishable  goods  have 
their  utility  destroyed  by  one  or  comparatively  few  acts  of 
consumption.  Economically  durable  goods  yield  a  rather 
long  series  of  enjoyments.  The  latter,  it  is  true,  afford  the 
better  opportunity  for  the  residence  of  existential  utili- 
ties. Hence  the  division  lines  of  the  two  classifications  run 
near  each  other.  Food  on  the  table  may  contribute  to  en- 
joyment by  its  form  and  looks,  as  well  as  afford  gustatory 
pleasures  and  nourishment  by  its  processes.  Such  utility  as 
prepared  food  possesses  from  the  former  point  of  view  is, 
abstractly  considered,  not  processive  and  not  economically 
perishable.  The  wearing  of  a  pair  of  shoes,  on  the  other 
hand,  involves  their  destruction  necessarily,  causatively, 
and  proportionally  to  their  use.  The  fact  that  they  are  sus- 
ceptible of  many  more  than  one  use  does  not  alter  the  pro- 
cessive character  of  their  consumption.  A  coat  whose  cut 
and  material  are  pleasing  to  the  eye  wears  out  as  a  result 
of  continued  use  for  protection.  It  has  the  two  sorts  of 
utility,  separable  only  by  abstraction. 

Economically  perishable  utilities  —  of  course  elements 
of  utility  rather  than  entire  goods  —  are  necessarily  con- 
sumed processively,  and  by  definition,  in  one  or  compara- 
tively few  acts  of  enjoyment.  Economically  durable  goods 
may  be  either  slowly  consumed  processively  or  enjoyed 
existentially.  Economically  perishable  utility  is  a  smaller 
circle  included  within  that  of  processive  utility. 

Physical  perishability  and  durability  also  have  a  rela- 
tion to  the  distinction  between  existential  and  processive 
utility.  A  bouquet  of  cut  flowers,  proverbially  illustrative 
of  the  ephemeral,  is,  with  a  qualification  as  regards  the 
perfume,  enjoyed  existentially.  Many  forms  of  food  are 
also  extremely  perishable  physically,  but  even  they  may 
have  some  degree  of  existential  utility.  It  is  obvious,  how- 
ever, that  such  goods  as  flowers,  even  though  thoroughly 
enjoyable  existentially,  cannot  be  prolific  of  this  kind  of 
utility,  because  the  period  during  which  they  can  be  enjoyed 


PROCESSIVE  AND  EXISTENTIAL  UTILITY      63 

is  so  limited,  and  because  it  is  of  the  nature  of  existential 
enjoyment  to  be  contemplative  or  passive,  not  intense,  and 
therefore  not  to  be  crowded  into  a  brief  time.  Thus  not 
only  economic  perishability,  which  is  the  case  with  proces- 
sive  utility  par  excellence,  but  physical  perishability,  also, 
is  so  much  an  obstacle  to  the  exploitation  of  existential 
utility  that  at  first  thought  one  would  not  think  of  the 
utility  of  a  bouquet  of  flowers  as  of  this  nature,  though  it 
is.  The  economically  important  forms  of  existential  utility 
inhere  in  physically  durable  goods,  often  in  goods  poten- 
tially of  infinite  duration. 

It  is  the  good  that  is  both  physically  and  economically 
durable  that  is  an  especially  appropriate  substrate  for  the 
development  of  existential  utility.  If  we  think  of  all  goods 
as  cross-classified  into  economically  perishable  and  dur- 
able, and  physically  perishable  and  durable,  respectively, 
then  the  condition  most  favorable  to  existential  utility  is 
found  when  an  object  is  within  the  circle  both  of  econom- 
ically durable  and  of  physically  durable  goods.  Both 
sorts  of  durability,  moreover,  offer  the  better  substrate  for 
existential  utility  in  proportion  to  the  length  of  their 
periods.  But  with  the  development  of  means  of  preserving 
physically  perishable  goods  the  physical  distinction  is 
coming  to  lose  much  of  its  importance  for  economics. 

Destruction  or  deterioration  of  utility  is  incidental  to 
practically  all  concrete  forms  of  enjoyment,  for  the  kinds 
of  utility  are  combined  and  a  processive  element  enters 
into  most  of  them.  The  needs  of  the  organism  require  much 
consumption  that  cannot  be  otherwise  than  processive. 
Many  highly  valued  goods  are  physically  perishable. 
Finally,  destruction  of  utility  frequently  comes  by  accident 
where  there  is  nothing  about  the  normal  enjoyment  of  the 
good  to  cause  it.  The  continuance  of  production  rests  upon 
no  uncertain  basis  in  assuming  the  deterioration  and  de- 
struction of  existing  utilities. 

greatest  significance  of  the  division  of  utility  into 


64   WELFARE  AS  AN  ECONOMIC  QUANTITY 

processive  and  existential  and  of  goods  into  perishable  and 
durable  is  in  relation  to  saving  and  accumulation.  Logi- 
cally, the  proper  approach  to  the  consideration  of  this  sub- 
ject should  perhaps  be  through  the  diminution  of  utility, 
since  saving  is  in  effect  the  application  of  a  portion  of  an 
abundant  supply  of  present  goods  to  a  new  use  outside  the 
present  in  order  to  obtain  a  higher  marginal  utility.  But 
saving  is  intelligible  otherwise  than  as  a  corollary  of  the 
principle  of  diminishing  utility,  and  has  doubtless  been 
practiced  on  other  grounds.  These  grounds  will  be  seen 
to  be  broader  than  would  find  warrant  in  the  merely  com- 
mercial and  pecuniary  interpretation  put  upon  such  mat- 
ters by  economists  too  much  inclined  to  the  business  man's 
point  of  view. 

if  Saving  and  commercial  investment  are  not  parallel 
phenomena  or  different  phases  of  the  same  thing.  There 
are  opportunities  for  saving  and  accumulation  within  the 
field  of  direct  utility  and  "  consumption j"  Savings  are  often 
incorporated  in  certain  concrete  goods  accumulated  for 
use,  chiefly  for  the  sake  of  a  permanent  psychical  income  of 
existential  utility.  ;Such  utility  embodied  in  physically 
durable  goods  will  yield  an  income  just  as  truly  as  invested 
funds.  The  dwelling  is  the  most  important  example  of  a 
good  that  yields  such  income.  Books  and  all  sorts  of  furni- 
ture have  a  similar  capacity.  The  income  from  a  dwelling 
house  is  so  definitely  recognized  and  so  considerable  that  it 
is  commercialized.  Indeed  the  dwelling  is  often  considered 
an  investment  even  by  the  man  who  owns  his  residence. 
But  from  the  social  point  of  view  it  is  always  a  consumption 
good. 

In  the  case  of  existential  income  from  possessions  there 
'is  no  definite  quantitative  relation  between  enjoyment  and 
destruction  of  utility.  There  will  be  costs  of  maintenance, 
but  these  will  be  a  very  small  fraction  of  the  income  if  due 
attention  is  originally  paid  to  permanence,  with  reference 
to  the  direct  utility  of  such  permanence  as  well  as  its  in- 


PROCESSIVE  AND  EXISTENTIAL  UTILITY      65 

vestment  value.  We  Americans  take  too  little  satisfaction 
in  solidity  of  construction.  [The  amount  of  utility  realizable 
/in  this  way  is  not  to  be  measured  by  the  discounted  utility 
of  the  extended  period  of  use.  It  is  another  matter  that  the 

1  amount  of  utility  is  of  course  limited  by  the  character  of 
the  consumer.  The  too  common  practice  of  hiring  or  rent- 
ing very  durable  consumer's  goods  obscures  the  possibilities 
of  the  situation.  Not  only  does  the  option  of  renting  check 
this  sort  of  accumulation,  but  the  use  of  rented  goods  de- 
stroys some  part  of  the  income  of  direct  utility  obtainable. 
There  can  be  no  pride  of  ownership  and  there  is  no  basis  for 
the  exercise  of  some  of  the  finer  activities  of  consumption. 
Development  of  broadly  sesthetic  possibilities  is  stunted. f 
Even  in  the  field  of  production  it  is  a  misfortune  that 

/  connection  between  owner  and  goods  owned  is  typically  no 
longer  direct,  but  takes  place  through  the  medium  of  ab- 

'  stract  property .  The  cultivation  of  American  farms  by  their 
owners  forms  an  exception  to  this  general  rule  as  regards 
the  nature  of  the  proprietary  relation.  Of  those  that  are 
well  kept  and  well  stocked,  how  many  are  made  such 
chiefly  by  commercial  motives  or  close  attention  to  what 
pays,  rather  than  by  pride  of  ownership?  Obviously 
few.1  But  the  evil  consequences  of  the  separation  between 
ownership  and  utilization  are  even  greater  as  regards 
consumption  goods  than  as  regards  the  instruments  of 
production. 

That  circumstances  favor  the  capitalistic  ownership  of 
certain  consumption  goods  is  deplorable.  The  consumer 
should  be  encouraged  to  provide  for  the  future.  He  cannot 
learn  what  such  provision  means  in  any  better  way  than 
by  acquiring  consumption  goods  that  will  yield  their 
utilities  chiefly  in  the  future.  Small  improvements  in  such 
possessions  will  constantly  be  made  with  little  or  no  sub- 
jective cost,  because  of  the  pleasure  taken  in  working 
upon  one's  own  goods.  It  is  therefore  unfortunate  that 
!  1  Cf .  Patten,  Consumption  of  Wealth,  p.  40. 


66       WELFAEE  AS  AN  ECONOMIC  QUANTITY 

the  growth  of  cities  and  of  ground  values  has  put  the 
ownership  of  a  home  beyond  the  reach  of  so  many,]  and 
that,  in  addition,  the  increasing  importance  of  mobility 
to  the  laborer  has  made  the  risks  involved  in  trying  to  own 
a  home  so  great.)  Bank  deposits  and  abstract  property  have 
I  no  advantages  that  quite  compensate  for  those  of  putting 
[pavings  into  concrete  possessions.  \  A  bank  account  is  doubt- 
less the  best  form  for  a  consumption  reserve,  because  of 
its  many-sided  availability,  but  this  seems  to  be  its  only 
point  of  superiority.  Even  this  advantage  is  obtained  in  the 
Orient  for  savings  embodied  in  concrete  goods  through 
wearing  a  reserve  of  precious  metal  in  the  form  of  brace- 
lets and  other  ornaments.  The  diamond  may  often  serve 
similar  purpose  in  the  West. 

Saving,  in  the  broad  sense  of  providing  goods  for  future 
5,  is  the  fundamental  problem  of  the  economy  of  con- 
.mption.  Though  the  degree  of  development  of  foresight 
and  prudence  is  sometimes  excessive,  it  more  often  falls 
much  short  of  adaptation  to  existing  conditions.  For  the 
sake  of  increasing  the  availability  of  a  consumption  reserve, 
such  complete  abstinence  from  current  use  of  savings  as 
takes  place  when  they  are  pecuniary  and  deposited  in  a 
bank  instead  of  being  embodied  in  durable  articles  of  use 
may  to  a  very  limited  extent  be  generally  desirable.  But  it 
is  otherwise  not  to  be  recommended.  Under  the  conditions 
of  life  of  the  majority,  investment  merely  for  the  sake  of 
pecuniary  income  is  not  justifiable.  Income  from  property, 
in  contrast  with  income  from  labor,  is  not  fundamental.  It 
is  rather  an  incident  than  a  basis  of  social  economy.  The 
emphasis  which  in  effect  identifies  providence  with  provision 
of  income  from  property,  with  intent  thus  to  make  income 
from  labor  unnecessary,  and  proffers  a  general  and  un- 
qualified recommendation  of  this  policy,  is  immoral  in 
substance  as  well  as  of  limited  practical  applicability.  It 
does  not  take  account  of  the  impossibility  of  generalizing 
the  plan,  and  supposes  that  what  is  good  private  economy 


PROCESSIVE  AND  EXISTENTIAL  UTILITY      67 

|  is  good  political  economy  I —  that  ancient  and  pervasive 
fallacy!  j  Attention  to  existential  utilities  is,  on  the  other 
hand,  within  the  reach  of  nearly,  if  not  quite,  all  men.  True 
economy  emphasizes  lasting  qualities  in  objects  of  durable 

I  use.  I  Of  course  diminishing  utility  still  puts  limits  upon 
saving,  in  ways  that  we  shall  later  see,  as  well  as  upon 
accumulation  for  merely  present  consumption.  But  that 
does  not  alter  the  fact  that  saving  should,  as  it  does  not 
under  current  conceptions,  relate  to  concrete  goods.1  If 
the  majority  of  workmen  cannot,  under  existing  conditions, 
own  the  capital,  or  even  implements,  that  they  use, — except 
in  agriculture,  —  if  it  is  even  too  risky  for  them  to  attempt 
to  own  their  homes,  it  is  still  possible  for  them  to  surround 
themselves  with  substantial  furniture  and  good  household 
appliances.  Here  they  should  make  a  beginning.  If  the 
crowded  and  unstable  life  in  the  city  is  too  great  an  obstacle 
even  for  this  much  saving  of  concrete  goods,  the  situation 
is  indeed  deplorable. 

The  significance  of  the  foregoing  distinctions  for  saving 
is  involved,  and  more  fully  explained,  in  their  relations  to 
rate  of  diminution  of  utility. 

1  Cf.  A.  S.  Johnson,  "Influences  affecting  Thrift,"  Political  Science 
Quarterly,  June,  1907,  vol.  xxn,  p.  224.  His  mode  of  approach  to  the 
question  as  to  the  nature  and  conditions  of  saving  is  different  from,  and 
his  treatment  broader  than,  that  of  the  text,  which  is  specially  concerned 
only  with  the  proposition  that  the  fundamental  form  of  savings  is  dur- 
able concrete  goods.  But  some  of  his  conclusions  are  remarkably  similar. 


CHAPTER   VI 

RATE  OF   CONSUMPTION  IN  RELATION  TO   DIMINUTION 
OF   UTILITY 

IF  the  uses  of  a  congeries  of  goods  are  restricted  to  the 
present  day,  the  diminution  of  utility  must  be  very  rapid. 
Processive  desires  are  quickly  sated,  and  the  alternative 
existential  utilities  require  time  for  gradual  exploitation 
and  development  as  one  learns  to  appreciate  them.  If,  on 
the  other  hand,  the  uses  of  the  goods  will  be  available 
through  an  indefinite  future,  and  if,  also,  there  will  be 
opportunity  for  their  selection  and  adaptation,  the  rate  of 
decline  of  utility  will  of  itself  be  hardly  sufficient  to  set 
any  limit  to  accumulation.  Further  acquisition  will  be 
checked  by  the  cares  of  administering  so  many  goods,  that 
is,  by  indirect  cost,  rather  than  by  the  diminution  of  direct 
utility.  In  other  words,  for  this  second  set  of  conditions, 
the  rate  of  diminution  of  the  utility  itself  will  be  very  low,\ 
that  is,  the  curve  will  slope  very  gradually.  On  the  other 
hand,  the  satisfaction  to  creative  sesthetic  instincts  yielded 
by  producing  such  goods  may  cause  the  supply  to  be  cor- 
respondingly abundant  and  the  marginal  utility  to  be  also 
low.1 

Goods  supplied  under  both  these  sorts  of  conditions, 
whether  combined  or  alternative,  will  be  subject  to  com- 
parison and  choice.  Hence  the  economic  importance  of  the 
difference  in  respect  of  the  rate  of  diminution  of  utility. 

The  principle  of  diminishing  utility  is  ordinarily  set  forth 

without  reference  to  the  extent  of  time  during  which  the 

utilities  can  be  enjoyed,  or  else  with  an  implied  restriction 

to  present  time  which  rules  out  of  consideration  future 

1  Cf .  page  59. 


RATE  OF  CONSUMPTION—DIMINISHING  UTILITY  69 

and  existential  utilities.  Thus  to  stop  at  the  hypothetical 
oranges  and  apples  is  to  shirk  the  task  of  analysis.  The  fre- 
quent extension  of  the  hypothesis  to  include  the  compulsory 
present  consumption  of  a  prescribed  number  of  oranges  at 
the  expense  of  negative  utility  is  but  a  further  step  into 
unreality,  not  an  illogical  outcome  of  restricting  the  point 
of  view  to  the  present.  Consumption  is  a  matter  of  choice 
and  volition.  No  one  would  choose  to  consume  a  dozen 
oranges  at  once,  at  the  expense  of  negative  utility.  Acts 
which  are  so  clearly  not  well-judged  do  not  even  need  to  be 
considered  as  disturbing  factors.  The  hypothetical  con- 
crete may  be  less  real,  as  well  as  less  true,  than  an  abstrac- 
tion. To  fail  to  consider  future  uses  of  existing  goods  in 
relation  to  the  diminution  of  utility  is  to  turn  aside  from 
an  important  phase  of  the  economy  of  consumption. 
/  Rate  of  consumption,  or  rate  of  removal  from  an  existing 
*  supply,  if  rapid,  is  so  either  because  of  physical  perishabil- 
/  ity  or  because  of  economic  perishability.  \  High  degree  of 
'  physical  perishability  is  the  stronger  case,  for  no  inhibi- 
tion of  enjoyment  can  prevent  the  depletion  of  a  supply 
having  this  characteristic.  Goods  that  are  perishable  in 
the  physical  sense  must  be  consumed  in  the  present,  or 
in  the  immediate  future,  which  may  be  considered  a  part 
of  the  economic  present.  Personal  services  are  the  perfect 
example  of  perishability.  Fresh  meat  and  vegetables  are 
similarly  perishable.  The  very  nature  of  such  goods  limits 
to  the  economic  present  the  time  during  which  the  supply 
may  be  applied  to  produce  satisfaction. 
/  In  order  to  utilize  goods  that  will  spontaneously  cease 
to  be  available  in  a  day  or  two,  immediate  uses  must  be 
found  and  wants  supplied  with  strict  regard  to  limited 
present  capacity.*  The  consumer  may  conceivably  be  will- 
ing to  fill  his  stqmach  with  fresh  fruit  at  the  cost  of  forego- 
ing other  food.i  But  even  so  heroic  a  measure  of  out-sub- 
}  stitution  can  provide  for  but  a  small  addition  to  the  ippply, 
\  and  that  at  the  expense  of  a  great  decline  in  utility!  Food 


70       WELFARE  AS  AN  ECONOMIC  QUANTITY 

ready  for  the  table  has  a  utility  especially  prone  to  fail  of 
full  exploitation.  To  contrive  a  way  to  delay  or  prevent 
decay  of  fruit  and  similar  commodities  is,  when  possible, 
the  economical  expedient,  even  if  that  involves  changing 
the  character  of  the  good  so  radically  as  to  put  it  into  a  dif- 
ferent class  of  supply.  Oranges  thus  become  marmalade. 

A  less  cogent  illustration  of  the  effect  of  physical  perish- 
ability upon  rate  of  diminution  of  utility  is  that  of  goods 
physically  perishable  but  not  ministering  to  a  physically 
limited  appetite,  such  as  cut  flowers.  The  existential  nature 
of  the  enjoyment  makes  it  possible  to  use  to  advantage  a 
larger  supply.  Complementary  relations  both  among  the 
flowers  and  with  other  objects  are  resources  not  equally 
available  for  processively  enjoyed  perishable  goods.  But 
the  lack  of  effective  uses  is  quickly  felt,  at  least  if  homo- 
geneity of  supply  is  insisted  upon.  Goods  of  this  sort  are 
not  numerous. 

It  is  proper  in  considering  the  rate  of  diminution  of  util- 
ity to  hold  to  the  point  of  view  of  the  individual.  The  above 
illustrations  do  this.  But  the  expansion  of  demand  for  a 
particular  good  in  a  market  is  not  dependent  merely  upon 
increasing  use  of  it  by  previous  consumers.  If  this  were 
true  the  commercial  disposal  of  physically  perishable  goods 
would  be  even  less  economical  than  it  is.  Demand  is  a  social 
fact.  New  uses  and  fresh  appetites  of  additional  consumers 
retard  the  decline  of  commercial  demand,  so  that  the  rate 
of  decline  of  price,  as  supply  increases,  will  be  slower  than 
the  diminution  of  utility.  Even  so  it  is  not  easy  to  induce 
buyers  to  remove  a  glut  of  perishable  goods.  1 

The  difficulty  of  disposing  of  a  large  supply  is  often  so 
that  dealers  find  it  scarcely  worth  while  to  try  to 
kempt  demand  by  lowering  prices.^  Dealers  in  fresh  fruit 
are  therefore  inclined  to  allow  a  large  part  of  the  product 
to  spoil  rather  than  radically  reduce  the  price,  even  when 
they  can  thus  reach  new  consumers.  \Whether  it  pays  to\ 
try  to  extend  demand  by  lowering  price,  thus  obtaining  a  \ 


RATE  OF  CONSUMPTION— DIMINISHING  UTILITY  71 

larger  net  return  from  a  smaller  profit  per  unit,  depends 
on  the  rate  of  diminution  of  utility,  or  strictly  upon  its 
market  representation  by  willingness  to  pay.i  If  the  lower- 
ing of  the  price  one-half  will  not  considerably  more  than 
double  the  demand,  dealers  may  prefer  to  maintain  prices 
by  destroying  part  of  the  supply,  or,  what  amounts  to  the 
same  thing,  by  letting  it  destroy  itself  ? 
*  High  rates  of  diminution  of  utility  are  evaded  or  dis- 
guised in  various  ways,  so  that  the  peculiarly  high  rate^ 
of  physically  perishable  goods  is  not  always  recognized.; 
Rates  of  demand  for  perishable  commodities,  determined 
by  limited  but  recurrent  use,  necessitate  corresponding 
adjustment  of  rates  of  supply.  \  Whether  this  occurs  among 
dealers  or  at  the  point  of  original  production,  the  result  is 
that  the  city-dwelling  consumer  does  not  often  have  occa- 
sion to  exercise  his  ingenuity  in  finding  new  uses  for  a  sur- 
plus. So  far  as  the  producer  is  also  consumer,  the  prob- 
lem of  disposing  of  an  unexpected  and  unsalable  surplus 
is  economically  insoluble.  Hence  the  farmer's  waste  of 
nature's  abundance  in  minor  products.)  Thus  to  most 
consumers  the  high  rate  of  diminution  of  utility  of  physi- 
cally perishable  articles  is  not  of  practical  concern.  An 
unusually  large  supply  is  likely  to  be  reduced  to  moderate 
proportions  before  it  reaches  them,  j 

So  far  as  goods  are  physically  very  perishable,  the  time  of 
consumption  or  enjoyment  does  not  enter  into  the  calcula- 
tion of  the  rate  of  diminution  of  utility.  So  far  as  goods  can 
be  stored  or  preserved,  which  is  the  situation  next  to  be 
considered,  time  does  enter  into  consideration.  Then  the 
principle  becomes  no  longer  simply  and  directly  applicable. 
Most  cases  of  diminishing  utility  are  therefore  complicated 
by  an  element  not  ordinarily  reckoned  with. 

Rate  of  consumption,  even  where  consumption  is  not 
coerced  by  the  imminent  physical  deterioration  of  its  ob- 
jects, may  still  be  high.  Economic  perishability  of  high 
degree  is  likely  to  mean  prompt  consumption.  The  time 


72   WELFARE  AS  AN  ECONOMIC  QUANTITY 

intervening  between  production  and  consumption  is  an 
element  of  cost  which  it  is  economy  to  reduce  to  a  mini- 
mum. Economic  perishability  is  also  likely  to  be  accom- 
panied by  physical  perishability.  Even  where  the  goods 
are  not  physically  but  only  economically  perishable,  there 
must  be  provision  for  regular  replacement.  Hence  there 
will  be  a  tendency  on  the  part  of  the  consumer  to  let  the 
future  take  care  of  itself. 

But  economically  perishable  goods  can  often  be  kept. 
Even  if  they  will  not  bear  mere  storing,  their  condition  or 
their  circumstances  may  be  so  modified  as  to  preserve  a 
portion  of  the  supply  for  a  time!  In  this  way  an  economical 
adjustment  of  a  temporarily  excessive  supply,  or  glut,  may 
be  effected.  Through  the  recurrence  of  appetite,  articles 
which  if  consumed  immediately  would  have  little  utility, 

fmay,  by  being  held  over,  come  to  have  much.)  Where 
rate  of  consumption  is  determined  mainly  by  economic 
perishability,  this  possibility  of  holding  over  some  of  the 
articles  may  have  decisive  importance  for  the  rate  of 
diminution  of  utility.  The  utility  obtainable  from  a  large 
yield  of  small  fruits  has  been  greatly  enhanced  by  the 
development  of  the  art  of  canning.  The  price  of  potatoes 
fluctuates  from  year  to  year  more  than  that  of  wheat  be- 

N  cause  one  season's  supply  cannot  so  easily  be  held  over. 
The  degree  of  utility  of  the  articles  to  be  held  over  is  less 

khan  it  would  be  if  they  could  be  economically  used  at 

/  present.  This  is  true  apart  from  the  likelihood  that  deteri- 
oration or  change  of  quality  may  result  from  storage  or 
from  the  use  of  preservative  measures.  \Such  effects  relate 

5  to  cost  rather  than  to  positive  utility.  The  utility  taken 
account  of  may  likewise  be  less  because  of  the  room  re- 
quired for  storage;  but  the  possessive  or  existential  utility 
of  a  generous  store  should  largely  counterbalance  such  an 
element  of  cost.  Mere  futurity  of  use  is  the  factor  of  fun- 
damental significance  wherever  physical  perishability  no 
longer  controls  the  situation.  By  resort  to  preservative 


RATE  OF  CONSUMPTION— DIMINISHING  UTILITY  73 

methods  this  applies  even  for  meats  and  fruits.  Future 
time  is  thus  a  factor  in  the  calculation  of  how  best  to  use 
an  abundant  supply.  But,  as  respects  its  modus  operandi, 
it  is  merely  a  special  case  of  diminishing  utility.  The 
utility  of  units  at  present  superfluous  may  have  full  effec- 
tiveness later  when  the  supply  has  been  reduced.  But 
their  present  utility  suffers,  or  is  a  discounted  utility,  by 
reason  of  the  necessity  of  postponing  consumption,  j 

However,  though  constituting  so  large  a  reservoir  of 
j  utility  for  goods  whose  enjoyment  can  be  thus  postponed, 
*f  future  uses  of  any  kind  or  class,  or  goods  having  such  uses, 
I  inevitably  diminish  in  degree  of  utility  as  their  number 
f   increases.  For  such  uses  diminishing  utility  applies  through 
the  discounting  of  the  future,  since  the  more  distant  the 
j  future  use,  the  greater  is  the  discount,  j  Discounting  the 
future  takes  away  more  utility  from  each  added  increment 
of  supply  in  proportion  to  the  remoteness  of  its  availability. 
Even  though  realizable  utility  does  not  at  all  deteriorate 
or  decrease,  the  necessity  of  postponing  use  to  some  time  in 
the  future  causes  diminution  of  equivalent  present  utility. 
If  this  is  the  only  cause,  the  rate  of  decline  will  be  charac- 
teristically slow.  The  reservoir  of  future  uses  affects  the 
steepness  of  the  curve  markedly  but  does  not  change  its 
character. 

Let  us  suppose  a  supply  of  like  units  having  an  objective 
(physical)  value  or  effectiveness  of  one  for  each,  all  obtain- 
able now  and  all  of  such  a  character  that  they  will  not  dete- 
riorate through  keeping,  but  subject  to  such  conditions 
as  regards  demand  that  one,  and  one  only,  is  wanted  with  a 
definite  and  constant  degree  of  desire  each  year.  If  the  rate 
of  discount  is  10  per  cent,  or  one-tenth  per  year,  these 
articles  will  exhibit  a  diminution  of  utility,  due  solely  to 
future  discount,  such  that  the  successive  units  will  be  val- 
ued, as  discounted,  at  respectively  100,  90,  81,  72.9,  65.6, 
59,  and  so  on.  But  without  the  discount  there  would  be  no 
diminution  of  utility.  Each  article  would  have  a  utility 


74       WELFAKE  AS  AN  ECONOMIC  QUANTITY 

of  100.  Of  course  the  illustration  involves  abstraction. 
But  its  point  is  of  both  theoretical  interest  and  practical 
bearing.  Without  future  discount,  the  utility  of  the  like 
units  of  an  increasing  supply,  composed  of  articles  not 
subject  to  deterioration  with  time,  but  processively  and 
quickly  consumed,  would  remain  constant.  I  In  proportion 
as  goods  approximate  the  character  assumed,  that  is,  in 
proportion  as  they  are  processively  consumed  with  regu- 
larity but  are  extremely  durable  physically,  they  exhibit^ 
diminishing  utility  only  because  of  future  discount.  This 
is  of  course  an  abstract  statement  of  principle  which  takes 
no  account  of  the  cost  of  keeping  articles  for  future  use. 
It  is  abstract,  also,  and  employs  a  hypothesis  contrary  to 
fact,  in  assuming  for  the  moment  the  absence  of  future 
discount.  This  psychical  process  is  of  fundamental  impor- 
tance in  economic  consumption  as  well  as  even  more 
important  in  production.  We  have  seen  how  Jin  the  field  ofi 
consumption  it  constitutes  a  special  case  of  diminishing 
utility.| 

/  Wherever  consumption  is  processive  in  its  nature,  the 
recurrence  of  objective  need  is  insured.  Hence  any  number 
of  goods  supplied,  no  matter  how  great,  will  continue  to 
have  some  utility  provided  their  physical  quality  can  be 
preserved.  There  is  no  warrant  for  assuming  that  utility 
must  become  zero  short  of  an  infinite  supply.  That  net 
utility  may  become  nil,  owing  to  the  increasing  relative 
importance  of  costs,  is  of  course  true,  but  that  is  not  due 
to  any  principle  of  diminishing  utility.  As  already  stated, 
it  is  not  correct  to  represent  the  curve  of  utility  at  its  lower 
levels  as  typically  declining  sharply  to  zero  or  below.1! 
!  To  the  great  economy  of  their  use,  the  later  goods  of  an 
abundant  supply  may  preserve  their  utility  but  little  im- 
paired by  being  held  for  the  future.  One  pair  of  shoes  of  a 
particular  kind  is  all  that  is  needed  for  present  use,  but  a 
rather  moderate  temporary  decline  in  price  might  induce 
1  Cf.  Diagram  I  and  the  accompanying  discussion  in  chap.  in. 


RATE  OF  CONSUMPTION— DIMNISHING  UTILITY  75 

one  to  purchase  several  pairs  for  future  use.  This  supposes, 
of  course,  an  appropriate  place  for  storage. 

It  is  unfortunate  that  the  conditions  of  city  life,  under 
which  more  and  more  of  the  people  live,  tend  to  make  the 
storing  of  goods  a  function  of  the  merchant  and  foster  a 
hand-to-mouth  existence.  So  far  as  this  is  the  practice, 
not  only  is  an  over-supply  less  easily  disposed  of  economi- 
cally, but  the  consumption  reserve  of  society  will  also 
probably  be  less  adequate  and  be  maintained  at  greater 
real  cost.  The  merchant  can  meet  the  cost  of  storage  only 
'  out  of  pecuniary  profits.  For  the  consumer  the  cost  is  met 
I  in  part  or  wholly  by  the  direct  enjoyment  of  possession 
and  abundance.  Objectively  considered,  also,  the  place  of 
storage  will  be  near  the  market  when  the  function  is  per- 
formed by  merchants  instead  of  near  places  of  consump- 
tion, where  the  use  of  room  will  be  much  cheaper.]  It  is 
true,  on  the  other  hand,  that  the  merchant's  methods  will 
doubtless  be  pecuniarily  much  more  efficient,  but  if  this 
means  less  labor  and  smaller  loss,  it  also  means  the  skimp- 
ing of  reserves. 

The  possibility  of  exchange  introduces  no  complication 
in  the  course  of  the  diminution  of  utility,  though  in  a  de- 
'  veloped  economy  it  acts  as  a  decided  limitation  on  the  ten- 
dency of  the  utility  of  a  supply  to  diminish,  especially  that 
sort  of  utility  which  is  embodied  in  durable  and  portable 
goods.  The  lowering  of  a  marginal  utility  to  the  individual 
brings  to  his  notice  the  possibility  of  obtaining  a  corrective 
gain  of  utility  by  exchange  for  some  other  article.  Thus 
units  of  an  abundant  supply  will  be  disposed  of  in  ex- 
change for  units  of  a  less  abundant  supply  having  a  higher 
marginal  utility.!  A  subjective  exchange  value  may  thus 
take  the  place  of  direct  utility  in  the  diminishing  series. 
This  indirect  utility  is  nearly  constant,  lience  the  diminution 
practically  ceases  at  what  may  be  called  the  "exchange  " 
point.  But  it  is  a  permissible,  or  rather  a  necessary,  abstrac- 
tion, to  leave  this  factor  out  of  consideration,  since  it 


76       WELFARE  AS  AN  ECONOMIC  QUANTITY 

belongs  outside  the  field  of  consumption.  Or,  if  we  take  the 
broad  social  point  of  view,  the  alternative  of  exchange 
disappears.  Economists  employ  this  abstraction,  usually 
without  mentioning  it,  in  discussing  the  diminution  of 
utility. 

From  the  point  of  view  of  society  as  a  whole, — and  also 
from  that  of  the  individual,  so  far  as  his  practices  are  not 
warped  one  way  or  the  other  by  his  situation  in  a  highly 
developed  exchange  economy,  —  abundance  finds  natural 
expression  in  better  provision  for  the  future  and  in  increased 
attention  paid  to  durability  and  existential  utility,  or,  if 
such  utility  be  embodied  in  intermediate  goods,  to  "fixed" 
forms  of  capital.  These  phenomena  are  usually  explained 
as  the  result  of  a  low  rate  of  interest.  It  is  doubtless  more 
nearly  correct  to  say  that  the  low  rate  of  interest  results 
from  abundance  of  goods.  But  more  fundamental  still  is 
the  operation  of  the  principle  of  diminishing  utility.  The 
consumer  seeks  to  check  the  rate  of  diminution  by  pro- 
jecting uses  further  and  further  into  the  future  through 
emphasis  on  permanence  of  subjective  as  well  as  of  objec- 
tive income,  t 

Economically  durable  goods  may  be  processively  con- 
ied  —  since  the  former  quality  is  a  matter  of  degree  — 

.d  physically  durable  goods  may  deteriorate.)  Though 
well-tanned  leather  is  exceedingly  durable,  shoes  are  worn 
out  and  the  need  recurs.  [The  case  of  processively  consumed 
goods  that  are  susceptible  in  greater  or  less  degree  of  being 
kept  for  future  use  covers  the  broad  middle  ground  between 
the  extremes  of  goods  or  utilities  that  must  be  enjoyed  in- 
stantly or  not  at  all  and  those  that  may  be  enjoyed  from 
time  to  time  for  an  indefinitely  prolonged  period  without 
requiring  a  renewal  of  the  supply  4  This  mode  of  consump- 
tion, through  deferring  the  time  of  consumption,  makes 
possible  the  adjustment  of  demand  to  large  production  or 
to  a  temporarily  high  rate  of  supply.  Time  and  time  dis- 
count therefore  affect  the  rate  of  diminution  of  utility  of 


RATE  OF  CONSUMPTION— DIMINISHING  UTILITY  77 

this  great  class  as  indicated  above.  How  then  does  it  af- 
fect the  extreme  case  next  beyond,  that  of  existentially 
enjoyed  and  absolutely  durable  goods? 

Physical  durability  conditions  the  permanence  and  im- 
portance of  existential  utility.  The  one  is  in  effect  the  body 
of  the  other.  The  situation  of  existential  utility  embodied 
in  goods  that  are  absolutely  durable  physically  affords  the 
apparent  paradox  of  consumption  or  an  act  of  enjoyment 
with  no  accompanying  reduction  of  the  supply  of  goods. 
There  is  therefore  no  rate  of  consumption.  If  infinite  or 
indefinite  durability,  notwithstanding  unstinted  enjoy- 
ment, can  be  assumed,  —  which  is,  of  course,  the  extreme 
and  abstract  case,  —  any  increase  of  supply  is  also  perma- 
nent. The  increase  occurs  once  for  all.  Duration  of  enjoy- 
ment does  not  enter  into  consideration  in  relation  to  the 
diminution  of  the  utility  of  such  a  supply  because  the  esti- 
mation of  each  unit  takes  account  of  all  the  future.  Where 
goods  do  not  of  themselves  decay  and  where  their  processes 
also  are  not  the  occasion  of  enjoyment,  their  comparative 
utility  is  not  affected  by  changes  in  supply  that  will  come 
with  the  passing  of  time,  for  time  will  have  no  effect  on 
the  existing  supply.  Once  existential  utility  is  separated 
(by  abstraction)  from  processive  utility,  there  is  a  case  for 
the  simple  and  direct  application  of  the  law  of  diminishing 
utility  uncomplicated  by  time  discount. 

It  would  seem  as  if  time  discount  should  be  of  maximum 
importance  and  should  be  most  effective  in  preventing 
rapid  diminution  of  utility  in  the  case  of  a  supply  of  exis- 
tential utility  embodied  in  permanent  goods.  But  in  this 
case  postponement  of  the  enjoyment  of  the  second  portion 
of  a  supply  does  not  mean  waiting  for  the  first  portion, 
through  the  exhaustion  of  its  utility,  to  make  room  for  the 
second.  Such  goods  are  not  subject  to  consumptive  pro- 
cesses. The  ordering  of  their  consumption  or  enjoyment 
is  a  problem  of  synchronous  harmony,  not  of  economical 
succession.  Among  such  goods  the  applicability  of  the  time 


78       WELFARE  AS  AN  ECONOMIC  QUANTITY 

discount  principle  is  accordingly,  at  least  in  one  direction, 
much  limited.  It  is  perhaps  not  even  necessary  for  them  to 
wait  their  turn  in  presentation,  since  ideas  of  possession, 
without  presence,  may  give  some  satisfaction.  If  this  applies 
generally,  as  it  seems  to,  the  diminution  of  utility  is  in  such 
cases  free  from  complications  due  to  time  discount.  The 
case  is  very  much  like  that  of  thoroughly  perishable  goods. 

Diminution  of  utility  through  time  discount  requires 
something  analogous  to  putting  a  number  of  lines  end  to 
end.  Lines  cannot  be  put  end  to  end  where  they  are  cut 
off  and  limited  strictly  to  a  narrow  space,  nor  where  each 
line  is  infinitely  long.  If  duration  of  use  is  either  completely 
confined  to  the  present  or  if  it  goes  to  the  other  extreme 
and  is  not  at  all  limited  by  time,  rate  of  consumption  and 
future  discount  may  be  disregarded. 

From  the  fact  that  time  does  not  affect  the  degree  of 
existential  utility  of  a  supply  of  such  physically  durable 
goods,  nothing  is  to  be  inferred  as  to  whether  the  rate  of 
diminution  of  their  utility  will  necessarily  be  either  high 
or  low.  This  depends  upon  the  capacity  of  consumers. 
But  if  that  capacity  is  large,  or  can  by  education  be  made 
so,  then  the  utility  should  decline  but  slowly.  ^Esthetic 
enjoyment  meets  these  requirements.  The  finding  of  these 
aesthetic  uses,  however,  is  rather  a  question  of  complemen- 
tary grouping  of  different  articles  than  of  increasing  a  homo- 
geneous supply.  But  the  supply  may  be  objectively  quite 
heterogeneous  and  still  be  one  supply.  Heterogeneity  is 
merely  relative,  at  least  with  regard  to  the  principle  of 
diminishing  utility.  The  supply  may,  therefore,  be  allowed 
to  contain  possibilities  of  complementary  grouping.  Hence 
the  relation  of  capacity  to  supply  may  be  considered  fav- 
orable to  a  low  rate  of  diminution  for  thoroughly  existential 
utilities.  The  rate  of  diminution  of  the  utility  of  a  supply 
of  successive  ounces  of  silver  in  the  form  of  tableware 
would  be  very  different  from  the  corresponding  variation 
of  the  utility  of  successive  bushels  of  potatoes,  chiefly  for 


RATE  OF  CONSUMPTION— DIMINISHING  UTILITY  79 

the  reason  that  the  enjoyment  of  silverware  offers  all  the 
possibilities  of  an  enduring  future.  The  utility  of  fruit  that 
must  be  eaten  soon  or  not  at  all  must  diminish  more  rapidly 
than  the  utility  of  books,  which  may  all  be  read  in  time, 
and  the  possession  of  which  may  be  enjoyed  continuously. 
Since  the  rate  of  deterioration  of  utility  is  different  for 
different  goods,  the  economic  ordering  of  consumption 
requires  the  comparison  and  equation  of  different  rates  of 
consumption  one  with  another,  and  thus  of  rates  of  supply 
and  consumption  with  things  constituting  supplies  that  are 
to  be  enjoyed  existentially,  without  "consumption"  in  the 
narrower  sense,  and  to  be  possessed  permanently.  The  laws 
of  processive  consumption  have  to  do  with  rates  of  supply: 
those  of  existential  enjoyment,  with  absolute  amounts 
supplied.  Newly  produced  diamonds  are  a  permanent 
addition  to  the  supply.  Newly  produced  beef  will  presum- 
\  ably  only  keep  pace  with  the  appetite  that  destroys  beef. 
Any  addition  to  the  supply  of  diamonds  is  a  dynamic  phe- 
Inomenon,  though  its  effect  may  be  balanced  by  other 
.dynamic  changes.  The  production  of  beef,  on  the  other 
land,  is  ordinarily  a  static  process.  So  much  "per  capita 
3er  year"  or  per  day  is  the  proper  way  to  measure  a  supply 
>f  processive  utilities.  If  this  ratio  remains  constant,  pro- 
duction merely  maintains  the  existing  equilibrium.  So 
much  for  so  many  consumers,  on  the  other  hand,  is  the 
appropriate  measure  of  existential  utility.  There  need  be 
no  mention  of  the  duration  of  time.  | 

The  link  between  the  two  sorts  of  supply,  and  the  means 
of  equation,  is  the  use  of  a  constant  rate  for  discounting 
future  uses  to  the  basis  of  the  present.  This  rate  may  be 
either  appropriate  to  the  circumstances  of  the  individual 
or  standardized  by  the  market  as  a  rate  of  interest.  If  the 
rate  of  discount  is  20  per  cent  per  annum,  then  the  present 
estimation  of  an  absolutely  permanent  source  of  utility 
yielding  a  given  amount  of  satisfaction  per  annum  should 
be  5  times  that  of  a  processive  good  yielding  the  same 


80   WELFARE  AS  AN  ECONOMIC  QUANTITY 

amount  of  satisfaction  in  its  one  or  few  uses  within  the 
year.  If  the  rate  of  discount  is  10  per  cent,  the  multiplier  is 
10;  if  5  per  cent,  the  multiplier  is  20.  It  is  assumed  that  the 
reader  can  work  out  the  mathematics  of  these  relations  for 
himself.  The  principle  is  the  same  if  present  enjoyment  is 
to  be  compared  with  that  for  a  period  extending  but  a  few 
years  into  the  future.  A  terminable  annuity  has  a  present 
value  not  equal  to  the  utility  of  the  prospective  payments, 
but  somewhat  less  than  their  sum.  Similarly,  one  may  com- 
pare the  utility  of  a  banquet  with  that  of  a  three-year  sub- 
scription to  a  periodical.  The  latter  would  have  to  promise 
a  considerably  greater  total  utility  in  order  to  be  preferred. 
Such  a  choice  always  involves  the  principle  of  future  dis- 
count, though  the  decision  results  from  processes  that  sel- 
dom have  any  resemblance  to  mathematical  calculation. 
It  is  unnecessary  to  refine  upon  the  method  by  comparing 
processive  consumption  completed  at  once  with  the  enjoy- 
ment of  a  series  of  uses  running  short  of  a  year. 

Differences  as  regards  the  character  of  the  curve  of  dim- 
inishing utility  are  most  complicated  in  the  concrete  mixed 
cases,  where  the  same  object  has  to  some  degree  both  exis- 
tential and  processive  utility.  Most  goods  have  both  these 
forms  of  utility,  combined  in  varying  proportions.  The 
concrete  case  is  often  so  intractable  just  because  the  rates 
of  diminution  for  the  two  are  very  different.  A  further 
complication  results  from  the  fact  that  the  relative  estima- 
tion of  the  two  elements  is  very  different  for  different  indi- 
viduals, according  to  their  appetites,  tastes,  and  circum- 
stances. These  differences  are  factors  in  most  exchanges. 
But  such  difficulties  do  not  affect  underlying  principles. 
/Supposing  the  direction  of  its  increase  is  controlled,  a 
supply,  or  a  congeries,  of  goods  that  includes  both  goods  for 
the  day  and  goods  for  all  time  will  consist  in  its  earlier 
increments  chiefly  of  goods  of  the  former  sort,  and  in  its 
later  increments,  chiefly  of  goods  of  the  latter  sort.  Here  is 
the  place  of  normal  saving,  or  care  for  future  uses  of  goods. 


RATE  OF  CONSUMPTION—DIMINISHING  UTILITY  81 

1  The  order  of  choice  in  the  acquisition  of  goods  for  consump- 
Ition,  present  and  future,  is  in  general  an  expression  of 
i  underlying  principles  of  variation  of  utility  and  of  the 
'attempt  to  counteract  its  decline.  1 

In  all  rational  judgment  of  utility  the  future  will  be  duly 
discounted  with  reference  to  risks  to  life  and  to  goods  in- 
herent in  the  nature  of  things.  But  this  is  a  question  of 
probabilities  and  actuarial  calculations,  not  of  the  discount 
for  futurity  as  such,  of  which  it  is  independent  and  not  a 
part,  though  a  coordinate  factor  working  with  it  in  practi- 
cal affairs.  The  factors  here  are  such  as  should  influence  a 
person  who  contemplates  investing  in  a  life  annuity.  Owing 
to  community  and  continuity  of  enjoyment  and  of  interest, 
resulting  from  family  ties,  such  considerations  do  not  ordi- 
narily count  for  much  in  the  economy  of  consumption. 
/  This  rather  lengthy  discussion  may  be  summarized  as 
follows:  Rate  of  diminution  of  utility  is  determined  by  rate 
of  destruction  or  objective  consumption  of  goods  as  well  as 
by  the  degree  of  elasticity  of  the  limit  of  capacity  to  enjoy. 
The  decline  of  utility  is  most  rapid  where  the  nature  of  the 
consumable  goods  compels  immediate  enjoyment.  This  is 
the  case  of  physical  perishability  and  of  a  rate  of  objective 
consumption  that  is  unavoidably  high.  In  order  to  utilize 
an  unusually  large  supply  of  such  goods,  appetite  must  be 
forced.  If,  under  such  circumstances,  supply  fails  of  de- 
tailed adjustment  to  ordinary  consumption,  the  effect  upon 
valuation  is  very  marked.  A  high  degree  of  economic  perish- 
ability, on  the  other  hand,  is  not  so  effective,  at  least  if 
preservation  or  storage  of  the  surplus  goods  is  practicable. 
Rate  of  consumption  and  conditions  of  demand  require,  in 
this  case,  not  a  certain  supply,  but  a  certain  average  rate  of 
supply,  that  is,  so  much  per  week  or  per  year.  Merely  tem- 
porary over-supply  will  not,  unless  combined  with  physical 
perishability,  cause  a  marked  decline  of  marginal  utility. 
By  equalization  of  supply  between  seasons  and  from  year 
to  year,  the  rate  of  diminution  of  utility  may  be  much  mod- 


m  "   WELFARE  AS  AN  ECONOMIC  QUANTITY 

erated.  Finally,  there  are  some  goods  that  have  no  rate  of 
consumption  in  either  sense.  They  are  subject  neither  to 
spontaneous  deterioration  nor  to  necessarily  destructive 
I  use.  Here  again  mere  capacity  to  enjoy  controls  the  rate  of 
diminution  of  utility.  It  is  not  mere  appetite,  however,  but 
a  capacity  that  can  be  educated,  and  the  enduring  charac- 
ter of  its  object  favors  education.  This  sort  of  capacity  will, 
therefore,  generally  show  a  slow  rate  of  decline  of  marginal 
utility.  These  differences  hi  the  rate  of  objective  consump- 
tion have  an  important  bearing  on  the  ordering  of  consump- 
tion and  on  the  vendibility  of  commodities.  They  have  also 
'their  general  social  significance  in  relation  to  forms  of 
saving  and  of  compensation  for  saving.! 


CHAPTER   VII 

THE  COMPLEMENTARY  RELATION 

THE  phenomena  of  consumption  are  subject  to  a  "law  of 
variety."1  This  law  is  a  further  expression  of  the  same  psy- 
chical tendencies  that  are  the  foundation  of  the  diminishing 
rate  of  diminishing  utility  and  of  the  elasticity  of  demand. 

As  goods  become  more  abundant  they  are  specialized  in 
order  to  lessen  the  diminution  of  the  power  to  satisfy.  Men 
come  to  discriminate  carefully  differences  of  quality.  Com- 
plex groups  of  different  goods  are  formed  in  order  to  en- 
hance the  enjoyment  of  consumption!  Increasing  civiliza- 
tion and  increased  accumulations  of  goods  thus  involve  the 
refinement  of  consumption.  The  refinement  of  consump- 
tion may  be  described  as  the  attentive  discrimination  of 
varieties  and  qualities  of  goods  and  the  utilization  of  their 
differences  to  intensify  their  psychical  effectiveness. 

Diversity  of  use,  as  has  been  shown,  accounts  for  the 
course  of  diminishing  utility  at  a  diminishing  rate.  Fav- 
ored by  objective  diversity  of  goods,  this  same  diversity  of 
use  may  quite  alter  the  character  of  the  variation  of  utility 
\for  successive  increments  of  goods.!  The  unstinted  satis- 
faction of  one  need  or  of  a  particular  set  of  needs  is  not 
enough.  A  man  turns  to  other  and  different  sources  of 
satisfaction  with  the  greater  strength  of  inclination  in 
proportion  as  there  is  by  comparison  too  much  of  one  par- 
ticular kind  of  good  at  his  disposal.  This  is  a  principle  of 
value  in  aesthetics  as  well  as  in  economics.  Variety  is  indeed 
the  great  means  of  intensifying  all  feeling.  This  seeking 
out  of  new  means  of  satisfaction  would  be  without  motive 

1  Cf .  Senior,  Political  Economy,  pp.  11-12;  Jevons,  Theory  of  Political 
I  Economy,  2d  ed.,  p.  58;  Patten,  Dynamic  Economics,  p.  41. 


84       WELFARE  AS  AN  ECONOMIC  QUANTITY 

if  the  situation  had   no   effect   upon   the  variation   of 
utility. 

In  proportion  as  a  number  of  goods  are  unlike  one  another, 
here  is  an  increase  of  the  possibility  of  an  interdependence 
f  the  satisfactions  derived  from  them.  Variety  itself  may 
>erhaps  produce  this  result  through  the  intensifying  effect 
f  contrast  upon  feeling*  The  juxtaposition  of  complemen- 
tary colors  intensifies  the  corresponding  sensations.   The 
mere  diversity  of  a  collection  of  goods  increases  the  pleasure 
they  afford.  The  merchant  with  a  varied  stock  of  goods  gets 
the  trade  of  people  to  whom  that  very  diversity  is  a  stum- 
bling block.  Each  enjoyable  good  is  not  merely  effective  for 
itself,  but  the  relations  of  the  various  goods  are  effective. 
A  principle  of  heterogeneity  crosses  that  of  homogeneity 
in  its  influence  upon  the  consumption  and  enjoyment  of 
goods.1  | 

Heterogeneity  of  itself,  however,  merely  affords  oppor- 
tunity for  the  organization  of  complementary  relation- 
ships. In  order  that  goods  be  complements,  it  is  also 
necessary  that  their  uses  fit  into  one  another .j  Here  we 
find  the  explanation  of  the  utility  of  a  "  supply  "  of  clothes 
that  is  really  a  suit,  that  is,  a  consumption  group  of  which 
the  members  are  interdependent.  But  the  principle  of 
diminishing  utility  is  quite  as  inadequate  to  explain  the 
successive  or  comparative  utility  of  the  several  suits  which 
an  individual  may  acquire  or  possess.  As  regards  suits  of 
outer  clothing,  one  for  winter,  one  for  summer,  one  for 
general  use,  and  one  for  evening  wear  are  perhaps  a  work- 
able foundation  for  a  young  man,  though  of  course  every- 
thing depends  upon  his  position  in  society.  Perhaps  a 
woman  would  require  a  dozen  gowns  in  order  to  possess  an 
equally  well-rounded  wardrobe.  Nor  would  the  principle 

1  Patten,  Dynamic  Economics,  chap,  viu,  on  "The  Influence  of  the 
Consumption  of  Wealth  on  the  Value  of  Commodities,"  is  especially  sug- 
gestive in  relation  to  the  significance  of  the  complementary  relation  in 
consumption.  • 


THE  COMPLEMENTARY  RELATION  85 

of  diminishing  utility  explain  the  degree  of  satisfaction 
given  by  such  a  collection.  But  clothing  is  not  complete 
with  gowns  or  suits.  The  humorist's  definition  of  content- 
ment as  that  state  in  which  a  man  possesses  a  pair  of  sus- 
penders for  every  pair  of  trousers  is  a  further  application 
of  the  same  principle.  In  the  furnishing  of  a  house  one 
needs  chairs,  but  not  a  homogeneous  supply  of  them.  In 
some  chairs  we  want  suitability  for  sitting  upright,  in 
others  for  rocking,  and  in  still  others  for  reclining.  The 
principle  of  diminishing  utility  has  but  a  remote  relation  to 
the  rational  furnishing  of  a  home.  The  furniture  of  a  room 
or  of  a  house  is  a  group  of  interrelated  goods  the  value  of 
each  of  which  depends  upon  the  completeness  and  the  com- 
plementary character  of  the  parts  in  the  whole.  So  it  is  in 
greater  or  less  degree  throughout  the  field  of  consumption. 

/The  utility  received  from  any  article  depends  upon  what  it) 
is  in  relation  to  that  to  which  it  is  being  addedJ 

As  regards  man's  attitude  towards  goods  in  general,  it  is 
said,  with  an  element  of  truth,  "The  more  a  man  has  the 
more  he  wants,"  seemingly  in  direct  contradiction  to  the 
principle  of  diminishing  utility.  But  upon  examination  we 
find  that  it  is  new  things  and  different  things  that  are  thus 
wanted.  A  man  wants  to  harmonize  and  round  out  the 
furnishings  of  his  residence.  He  wants  books  to  fill  out  the 
gaps  in  his  private  library.  He  wants  more  room  in  which 
to  keep  both.  He  wants  a  country  home  to  which  he  can 
sometimes  escape  from  the  complexities  of  city  life.  We 
may  as  well  stop  here,  though  the  able  and  ambitious  man, 
or  his  wife,  need  never  stop  in  the  pursuit  of  things  to  "go 
with"  what  he  already  has. 

A  diversification  of  goods  adequate  to  diversity  of  de- 
sires, or  such  as  to  stimulate  desire,  has  thus  a  very  differ- 
ent effect  from  the  simple  increase  of  a  supply  of  like  goods, 
—  an  effect  which  may  possibly  amount  to  increasing 
utility.  The  goods  latest  added  to  the  ones  habitually 
^possessed  and  consumed  are  highly  valued  and  not  lightly 


86   WELFARE  AS  AN  ECONOMIC  QUANTITY 

given  up.  Much  apparent  irregularity  and  extravagance  in 
the  spending  of  a  limited  income  is  due  to  the  temptations 
of  such  a  situation.  The  appeal  of  the  novelty  and  of  the 
thing  that  goes  so  nicely  with  what  one  already  has  is  very 
strong. 

I  Complements  are  goods  so  related  to  and  interdependent 
6n  one  another  that  a  part  of  their  utility  is  a  joint  utility! 
which  would  be  destroyed  by  the  dissociation  of  the  goods,; 
Each  good  that  a  man  enjoys  has,  with  few  exceptions,  in 
addition  to  its  own  particular  utility,  a  share  of  comple- 
mentary utility,  by  so  much  as  it  is  with  advantage  grouped 
with  other  goods  in  consumption.  An  increase  of  the  supply 
of  goods  of  the  same  sort  is  subject  to  the  principle  of 
diminishing  utility.  But  the  later  goods  obtained  may 
bring  more  than  a  proportionate  addition  of  utility  pro- 
vided they  are  complements  of  previous  possessions  instead 
of  being  similar  to  them.)  Diminishing  utility  is  a  law  of  thel 
variation  of  particular  utility.  Complementary  utility  is] 
governed  by  different  principles.) 

The  theory  of  the  complementary  relation  of  economic 
goods  received  its  name  from  Carl  Menger,  who,  together 
with  Wieser  and  Bohm-Bawerk,  have  developed  it  and 
given  it  a  recognized  place  in  economics.1  But  the  Aus- 

1  The  chronology  is  as  follows:  Menger,  Grundsdtze  der  Volksioirt- 
schaftslehre,  1871.  The  concept  and  term  "complementare  Verhaltniss" 
is  introduced  in  the  first  few  pages  and  made  much  of  throughout.  Wieser, 
/  Ur sprung  und  Hauptgesetze  des  wirtschaftlichen  Werthes,  1884,  and  Na- 
turliche  Werth,  1888,  develops  the  theory  of  imputation,  which  is  of  course 
based  on  the  complementary  relation.  Bohm-Bawerk's  contributions  are 
contained  in  his  Grundzuge  der  Theorie  des  mrtschaftlichen  Guierwerthest 
two  articles  in  the  Jahrbuchfur  Nationalokonomie,  1886,  and  in  his  Posi- 
tive Theorie  des  Kapitalst  1889.  The  articles  on  Giiterwerth  pay  much  atten- 
tion to  replaceability,  of  course  in  the  complementary  group,  as  deter- 
mining value.  The  prominence  of  Bohm-Bawerk  in  the  discussion  of 
capital  and  interest  has  made  him,  it  seems  to  the  writer,  to  an  undue 
extent  the  interpreter  of  Austrian  theory  generally,  at  least  in  America. 

All  these  Austrians  pay  little  attention  to  anything  besides  the  inter- 
relations of  the  factors  and  means  of  production.  Menger  is  as  much 
interested  in  the  serial  interdependence  of  the  different  orders  of  goods 


THE  COMPLEMENTARY  RELATION  87 

\trians  concern  themselves  with  the  value-interrelations  of 
{productive  agents  onlyj  The  interdependence  of  land, 
labor,  and  capital  is  doubtless  the  best  illustration  of  the 
complementary  relation,  as  well  as  its  most  important 
application  in  economics. /But  the  relation  of  goods  to  one 
;  another  as  means  of  enjoyment  is  also  highly  important 
|  in  consumption,  and  is  perhaps  more  fundamental.  Such 
j  attention  as  this  phase  of  the  subject  has  received  is 
i  chiefly  due  to  Professor  Patten.1  In  the  case  of  the  comple- 
mentary relation  of  factors  of  production  the  utility  re- 
sulting from  grouping  becomes  largely  imputed  economic 
value.  Imputation  of  value,  though  based  upon  the  com- 
plementary relation,  involves  something  more  than  that, 
and  will  be  considered  later  in  connection  with  transputed 
utility,  which  is  its  representative  in  the  field  of  con- 
sumption. Here  we  are  considering  complementary  utility 
as  such,  without  reference  to  the  frequent  but  not  neces- 
sary result,  transputation  or  imputation.  | 
r  Entirely  satisfactory  illustrations  of  complementary 
^consumption  are  difficult  to  obtain  only  because  it  is  so 
I  omnipresent.  \  There  are  so  many  interrelations  of  each 
good,  and  these  interrelations  are  often  so  complex,  that  it 
is  not  easy  to  detach  one  group.  Only  by  abstraction  can 
one  group  be  separated  from  others,  and  the  grouping  may 
be  largely  due  to  historical  coincidence.  Beer  has  been 
called  "the  syncretic  accompaniment  of  sausage,"  and  the 
connection  is  certainly  more  than  an  accident  in  the  history 
of  civilization  and  of  nations.  Its  bitterness  as  well  as,  in 

—  an  idea  incidentally  referred  to  above  at  page  11  —  as  in  their  con- 
temporaneous cooperative  grouping.  He  extends  the  term  complementary 
in  a  special  wider  sense  to  cover  both  sorts  of  interrelation  (p.  11).  This 
does  very  well  in  the  field  of  production.  But  we  should  hardly  speak  of 
a  complementary  relation  between  a  good  of  the  first  order  and  those  of 
remoter  orders  upon  which  its  enjoyment  depends.  In  consumption, 
complementary  goods  must  be  thought  of  as  used  in  conjunction  with 
one  another  and  as  all  of  the  first  order,  while  for  goods  of  remoter  order 
degree  of  remoteness  does  not  matter. 
\  l  Theory  of  Consumption,  1st  ed.,  1889,  and  Dynamic  Economics,  1892. 


88       WELFARE  AS  AN  ECONOMIC  QUANTITY 

Germany,  its  cheapness,  appear  to  fit  it  for  this  association. 
But  who  can  prove  complementariness  when  the  associa- 
tion is  also  a  precipitate  of  centuries  of  history?  Beer- 
drinking  is  a  time-honored  Teutonic  tradition.  Feudalism 
and  the  retardation  of  the  peaceful  economic  development 
of  civilization  long  kept  swine-culture  unduly  prominent  in 
Germany.  Pork  needs  to  be  highly  seasoned,  and  sausage- 
making  is  in  part  a  device  for  the  thorough  seasoning  of 
meat.  Thus  the  association  may  be  traced  to  historical 
causes.  At  any  rate,  historical  and  other  factors  are  inter- 
woven. 

/  The  determinate  association  of  certain  condiments, 
/sauces,  and  salads  with  certain  other  dishes  in  skilled 
/cookery  ought  to  furnish  a  long  list  of  illustrations  of  har- 
t  monious  consumption  groupings .)  The  chef  who  is  really  a 
master  of  his  art  has  a  repertory  of  such  harmonies  of 
taste  and  smell,  which,  for  their  full  effectiveness,  must 
further  receive  appropriate  setting  of  tableware  and  linen 
and  other  accompaniments.  [The  skill  of  the  housewife 
depends  upon  a  delicate  sense  lor  complementary  relations, , 
Homelike  living  conditions  are  the  product  of  the  compl 
mentary  association  of  many  economic  and  other  utilitie 
the  absence  of  any  one  of  which  may  be  destructive  of 
happiness.  Home  makes  its  strong  appeal  because  of  its 
complex  harmonious  stimulation  of  so  many  important 
instincts  and  interests.  Comfort  also  is  a  result  of  com- 
plementary conditions. 

The  peculiar  field  of  the  complementary  relation  is  in  the 
t comforts"  of  life.  Discomfort  is  usually  due  to  the  fact 
that  our  surroundings,  and  by  reflection  ourselves,  are 
Tout  of  joint."  Comfort  suggests  a  due,  and  only  a  due, 
dependence  on  things  material,  a  position  which  should 
strongly  commend  itself  to  the  economist.  Necessaries  are 
too  exacting.  They  control  the  consumer  more  than  they 
are  controlled  by  him;  Luxuries,  if  not  thoroughly  adventi- 
tious, are  too  much  a  matter  of  caprice  and  are  unamiable. 


THE  COMPLEMENTARY  RELATION  89 

Comfort  is  modest  and  unpretentious.  That  it  smacks  of 
the  material  should  not  be  held  against  it. 

Mere  sumptuousness  is  in  bad  taste,  because  it  is  an 
evidence  of  failure  to  find  or  exploit  complementary  rela- 
tions, and  thus  of  inefficient  consumption.  In  dress  and 
in  entertainments,  not  expense,  not  lavishness,  but  the 
harmonious  adjustment  of  parts  in  a  whole  is  most  effec- 
tive. | 

We  have  assumed  that  heterogeneity  of  goods  is  neces- 
sary to  their  bearing  a  complementary  relation  to  one 
another.  The  situation  out  of  which,  it  appears,  the  com- 
plementary relation  emerges  is  that  of  relatively  simple 
desire  over  against  a  complex  of  goods.  The  desire  for  the 
comforts  of  home,  though  psychologically  simple,  is  com- 
plex in  its  economic  manifestation.  But  is  this  hetero- 
geneity of  goods  a  necessary  condition  of  the  complemen- 
tary relation?  It  would  seem  that  twelve  dinner  plates  of 
one  style  are  complements  of  one  another,  and  that  a 
number  of  curtains  of  the  same  sort  are  needed  to  complete 
a  set.  But  the  set  of  curtains  is  wanted  for  a  particular 
room  or  house.  The  curtains  are  really  the  complements  of 
the  windows.  The  dinner  plates,  also,  are  complements  of 
the  other  dishes  of  the  set  and  of  other  table  furnishings, 
perhaps  even  including  the  guests.  Likeness,  even  as  an 
occasional  basis  for  complementary  utility,  will  not  stand 
^analysis.  It  may  enter,  but  only  as  a  minor  and  somewhat 
accidental  part  of  a  situation  which  as  a  whole  is  one  of 
heterogeneity.  Unlikeness  is  a  fundamental  qualification 
for  the  complementary  relation. 

It  is  natural  to  compare  the  complementary  relation  in 
economics  with  the  effect  upon  the  intensity  of  sensation  or 
the  juxtaposition  of  complementary  colors.  There  is  more 
than  an  analogy,  but  also  less  than  a  perfect  analogy,  be- 
tween these  two  cases.  Some  economically  complementary 
effects  are  doubtless  due  to  the  intensification  of  the  specific 
quality  of  each  member  of  the  group.  But  in  general  the 


90   WELFARE  AS  AN  ECONOMIC  QUANTITY 

group  has  its  own  peculiar  character  distinguishable  from 
the  contribution  of  each  member. 

The  complementary  relation  is  much  too  general  a  phe- 
nomenon to  conform  itself  fully  to  economic  conceptions 
or  to  admit  of  clear-cut  delineation  and  exposition  from 
this  or  any  other  single  point  of  view.  Recreational  plea- 
sures are  the  complements  of  labor,  each  having  a  bene- 
ficial effect  upon  the  utility  of  the  other.  Luxuries  are 
complements  of  simple  necessaries.  Hence  the  danger  of 
too  great  freedom  from  the  need  of  economy  and  of  care 
in  expenditure.  But  in  economics  only  utilities  that  admit 
of  economic  conception  and  manipulation,  that  is,  in  the 
highest  degree,  those  embodied  in  concrete  goods,  can  be 
included  in  a  theory  of  the  complementary  relation.  Ethics 
should,  of  course,  go  farther. 


CHAPTER   VHI 

THE    STANDARD    OF    LIFE    AS    BASED    UPON 
COMPLEMENTARY  UTILITY 

THE  most  important  case  of  the  complementary  relation  in 
consumption  is  that  association  of  necessaries,  comforts, 
and  luxuries  which  constitutes  a  man's  standard  of  life.1 
The  standard  of  life  is  a  psychical  fact.  Stability  is  imparted 
to  it  by  both  thxThabits  and  the  ideals  of  which  it  is  com- 
pounded. Whatever  is  considered  a  part  of  the  standard  of 
life  has  an  accession  of  importance  by  reason  of  this  relation. 
It  will  not  be  sacrificed  lightly.  The  most  importunate 
instinct  may  be  held  in  check  by  regard  for  the  standard  of 
life.  Hence  the  point  of  its  definition  as  consisting  of  those 
articles  of  customary  consumption  which  a  man  will  not 
sacrifice  for  the  sake  of  marrying .}  Whenever  the  pleasures 
^and  comforts  of  marriage  and  family  life  are  postponed  for 
the  sake  of  continuing  the  consumption  of  certain  articles, 
these  are  held  to  for  the  sake  of  more  than  their  own  parti- 
cular utility. 

It  is  because  of  its  character  as  a  group  of  complements, 
moreover,  that  the  standard  of  life,  once  destroyed,  is  not 
easily  built  up  again.  A  generation  brought  up  under  harder 
conditions  of  life  does  not  know  the  meaning  of  a  higher 
standard,  since  it  is  able  to  enjoy  only  one  or  two  of  its 
components  irregularly  and  piecemeal.2  The  complex 
group  is  no  longer  to  be  known  as  such.  There  is  little  or 
no  opportunity  for  the  mass  of  such  a  population  to  be- 
come familiar  with  or  adapted  to  the  better  standard. 

\   1  Duly  recognized  as  a  phenomenon  of  the  complementary  relation  by 
fatten,  Dynamic  Economics,  chap,  xx,  "The  Standard  of  Life." 
'    2  Cf .  Walker,  Political  Economy,  sec.  346,  for  an  effective  statement  of 
conditions,  though  not  in  terms  of  the  complementary  relation. 


92   WELFARE  AS  AN  ECONOMIC  QUANTITY 

A  high  standard  of  life,  involving  the  use  of  an  extensive 
variety  of  articles  of  consumption,  though  fundamentally 
a  psychical  phenomenon,  is  favored  or  hindered  by  environ- 
mental conditions  of  supply.  Passing  reference  to  some  of 
these  matters  will  illustrate  the  character  of  the  standard 
of  life  as  a  phase  of  the  complementary  relation. 
|  Food  plays  the  largest  part  in  the  consumption  of  the 
jmajority,  and  the  standard  of  life  is  therefore  especially 
related  to  the  conditions  of  food  supply.  Where  one  great 
article  of  food  is  much  cheaper  than  any  other,  under  ecp- 
nomic  pressure  there  is  a  temptation  to  subsist  more  and 
more  upon  that  alone.  Unrestrained  multiplication  is  likely 
to  result  in  peopling  up  to  the  food  supply  and  in  hard  and 
precarious  subsistence  for  the  masses^  This  is  why  it  can 
be  said  with  a  good  deal  of  truth  that  the  potato  was  the 
ruin  of  Ireland.  The  monotonous  rice  diet  of  the  masses  in 
the  Far  East,  also,  is  an  important  clue  to  economic  condi- 
tions there.  The  situation  is  much  better  when  severaj 
articles  of  food  do  not  greatly  differ  from  one  another  in 
cost,  so  that  there  is  not  much  temptation  to  simplify  con- 
sumption and  little  danger  of«losp^g  the  advantage  of 
choosing  and  combining  articles  of  food  from  diverse  sup-^ 
plies  in  a  complementary  relation.1  The  more  costly  a| 
I  nation's  staple  food  is,  the  more  easily  it  finds  complements  1 
and  substitutes.^  Wheat  is  better  than  potatoes,  because; 
the  actual  comparison  is  between  wheat  with  other  accom- 
paniments and  alternatives  and  potatoes  with  nothing  else.2 
^Partly  for  a  similar  reason,  the  standard  of  life  is  likely  to 
be  higher  in  a  cold  than  in  a  warm  climate,  since  in  the  for- 
mer animal  food,  as  compared  with  vegetable,  is  less  expen- 
sive than  in  the  latter.  The  increase  of  agricultural  rent 
resulting  from  the  increase  of  population  promotes  a  varied 
diet,  in  so  far  as  it  requires  more  intensive  cultivation  and 
the  combination  of  different  crops,  either  at  the  same  time 

I  »  Cf .  Patten,  Consumption  of  Wealth,  p.  46. 
2  Ibid.,  p.  48. 


THE  STANDARD  OF  LIFE  AS  COMPLEMENTARY    93 

or  in  rotation.1  The  reduction  of  the  cost  of  transportation, 
by  reducing  the  cost  of  imported  articles  of  consumption, 
notably  the  products  of  the  tropics,  favors  variety  in  con- 
sumption and  the  development  of  further  complementary 
utility.2  | 

1 T  We  may  expect  another  important  effect  of  an  increase  of 
I  agricultural  rent  upon  the  standard  of  life.  An  increase  in 
/  the  proportion  of  the  price  of  raw  produce  taken  by  rent 
.  means  relatively  higher  prices  for  the  raw  produce  than  for 
the  superposed  processes  of  manufacture  and  hence  a  de- 
1   crease  of  the  distance  between  merely  enough  food,  that  is, 
bare  subsistence,  which  is  by  comparison  raw  produce,  and 
a  comfortable  living,  which  requires  some  elaboration  of 
goods.3  This  connection  has,  however,  been  obscured  by 
the  improvidence  of  laborers  which  .has  generally  accom- 
;  panied  increase  of  population  and  high  rents.   Technical 
improvements  in  manufactures  also  work  in  the  direction  of 
making  relatively  slight  the  difference  of  cost  between  bare 
subsistence  and  comfort.   The  laborer  is  not  so  likely  to 
lose,  or  if  he  does  lose,  he  can  more  easily  regain,  a  better 
standard  of  life  if  the  finer  processes  and  products  are  rela- 
j  tively  inexpensive.!  The  cost  of  the  raw  materials  that  go 
into  a  loaf  of  bread  is  said  to  be  about  one  fourth  the  price 
of  the  loaf  as  retailed.   For  this  country  the  ratio  of  3  to  1 
I  is  probably  fairly  representative  of  the  present  relative 
I  costs  of  the  simpler  forms  of  manufacture  and  sale  as  com- 
pared with  the  cost  of  producing  raw  materials.    Such 
ratios  are  not  most  favorable  to  a  high  standard  of  life. 
The  extensive  opening  up  of  new  lands  to  cultivation  in 
the  last  century  was  less  of  a  permanent  benefit  to  human- 

i. 

1  Walker,  Political  Economy,  3d  ed.,  1888,  sec.  398,  emphasizes  the 
"craving  for  a  diversified  diet"  —  which  reminds  one  too  much  of  "the 
propensity  in  human  nature  ...  to  truck,  barter,  and  exchange"  alleged 
by  Adam  Smith. 

2  Patten,  Consumption  of  Wealth,  p.  64. 

3  Cf .  Ricardo,  Principles  of  Political  Economy  and  Taxation,  chap,  v, 
paragraph  near  the  end  of  sec.  37. 


94       WELFARE  AS  AN  ECONOMIC  QUANTITY 

ity  than  the  contemporaneous  improvement  and  cheapen- 
ing of  manufacturing  processes. 

If  technical  improvements  should  come  to  be  more  effec- 
I  tive  in  reducing  the  cost  of  food  and  raw  materials  than  of 
I  manufactured  products,  it  would  be  a  misfortune.  If  they 
should  take  a  turn  such  that  some  single  standard  food 
could  be  manufactured  cheaply  by  chemical  processes,  a 
situation  would  arise  that  would  be  of  all  external  condi- 
tions the  most  unfavorable  to  a  high-standard  of  life.  For 
it  can  be  assumed  that  human  nature  would  continue  to 
remain  what  it  is  and  that  men  would  therefore  continue  to 
Heed  economic  props  to  aid  in  protecting  them  from  their 
Own  primitive  impulses.  The  extensive  direct  fixation  of 
nitrogen  would  be  less  disastrous,  for  it  would  not  involve 
less  variety  in  food,  since  lavish  fertilization  of  the  soil 
would  favor  the  production  of  many  kinds.  But  it  would 
make  many  of  the  important  permanent  possibilities  of 
satisfaction  cost  relatively  more  than  at  present.  Rela- 
tively cheap  food  is  anything  but  an  unmixed  blessing  for  a 
people,  i 

An  illustration  of  the  effect  of  relative  costs  upon  choice 
in  consumption  and  upon  the  standard  of  life  is  to  be  seen 
in  the  character  of  dwelling-houses  in  very  large  cities  as 
compared  with  those  in  the  country.)  The  difference  may 
be  partly  due  to  the  requirements  of  fire  protection  in  cities, 
and  also  to  the  stronger  tendency  of  the  city-dweller  to 
spend  for  consumption  up  to  the  limit  of  his  income.  But 
this  is  not  all.  City  houses  are  more  expensively  built 
partly  because  the  cost  of  a  dwelling,  including  the  site,  is 
so  largely  the  cost  of  the  latter.  Consequently,  a  small  per- 
centage of  the  total  cost  makes  all  the  difference  between 
tolerable  and  elegant  quarters.  In  the  country,  on  the 
other  hand,  the  dwelling  usually  contains  plenty  of  room, 
but  its  construction  is  likely  to  be  anything  but  solid  or 
elegant.  The  cost  of  mere  room  in  large  cities  is  very  great, 
hence  the  pressure  of  the  housing  problem.  If  comparisons 


THE  STANDARD  OF  LIFE  AS  COMPLEMENTARY    95 

are  made  on  the  basis  of  a  given  level  of  solidity  and  finish 
in  house  construction,  however,  one  can  scarcely  question 
that  the  proportion  of  the  population  of  the  country  in  this 
sense  poorly  housed  is  much  greater  than  that  of  the  city. 
For  the  sake  of  having  highly  polished  hardwood  interior 
finish,  the  dweller  in  the  country  might  have  to  sacrifice  25 
per  cent  of  his  room,  while  the  city  dweller  may  need  to  give 
up  only  10  per  cent.  Following  the  line  of  least  economic 
resistance  produces  very  different  results  under  such  differ- 
ing conditions. 

The  division  of  consumable  goods  into  necessaries,  com- 
forts, and  luxuries  is  varied  somewhat  by  Senior,  who  sub- 
stitutes "decencies"  for  the  middle  term.1  Decencies  and 
comforts  are  to  some  extent  the  same  goods  looked  at  from 
different  points  of  view.  The  former  are  things  one  must 
have  in  order  to  maintain  a  tolerable  social  status.  Thus 
the  demand  for  comforts,  in  the  character  of  decencies,  is 
supported  by  the  greater  esteem  in  which  their  possessor  is 
held.  But  the  complementary  relation  is  more  fundamental 
than  this  last  factor.   As  compared  with  the  demand  for  ! 
luxuries,  the  desire  for  comforts  gets  its  cue  but  little  from  : 
other  human  beings.  But  there  are  some  minds  all  of  whose?  ' 
choices  are  imitative. 

The  reasons  why  the  maintenance  of  a  tolerable  standard 
of  life  is  held  to  be  of  so  great  importance  by  the  intelligent 
consumer  do  not  appear  in  their  entirety  merely  from  the 
consideration  of  complementary  utility.  |  The  positive  at- 
tractions of  a  high  standard  are  chiefly  phases  of  the  com- 
plementary relation.  But  there  is  also  a  powerful  vis  a 
tergo  operative  to  prevent  an  easy  surrender  of  goods  not 
necessaries.  I  Bare  necessaries,  and  goods  in  general  so  farl 
as  consumed  fo  tfrfl.t.  pha/ranter,  ^make  little  or  no  contribu-l 
tion  to  satisfaction.?  The  development  of  this  point  forma 
the  subject  of  a  later  chapter.2 
1  The  economic  function  of  the  family  is  the  care  of  con- 

I    ~-W 

^-v*    i  Political  Economy,  p.  36.  2  Chap.  xi. 


96   WELFARE  AS  AN  ECONOMIC  QUANTITY 

sumption.  This  applies  generally  at  present  and  also  seems 
to  be  the  best  permanent  adjustment.  At  one  time  produc- 
tion also  was  organized  upon  the  basis  of  the  family  unit. 
But  progressive  economic  differentiation  and  division  of 
labor  have  now  almost  completely  stripped  the  family  of 
productive  functions.)  It  is  natural  that,  as  women  find 
work  in  the  home  a  fess  secure  foundation  for  existence, 
more  of  them  seek  industrial  occupation.  Or,  in  the 
"higher"  social  strata,  they  may  have  no  serious  occupa- 
tion or  avocation  at  all.  The  effect  reacting  upon  the  cause, 
women  become  less  fit  for  home-making.  The  home  tends 
to  be  no  longer  the  center  of  education  for  the  child  nor  of 
recreational  interests  for  the  husband.  For  a  man  to  marry 
may  thus  come  to  mean  hardly  more  than  his  undertaking 
to  pay  the  board  bills  of  two  instead  of  one.  But  perhaps 
the  wife  continues  "at  work."  One  breadwinner  does  not 
then  need  to  earn  enough  for  a  family  and  perhaps  cannot. 

The  present  tendency,  as  foreshadowed  in  the  large 
cities,  threatens  to  leave  to  the  family  no  economic  func- 
tions at  all.  If  there  is  any  truth  in  the  theory  of  an  eco- 
nomic interpretation  of  history,  it  must  then  go  badly  with 
the  family.  The  institution  was  not  founded  upon  sexual 
relations,  and  will  not  be  secure  upon  such  a  basis,  no  mat- 
ter how  much  suffused  with  romanticism.  The  "emancipa- 
tion of  women"  has  its  advantages,  of  course,  but,  so  far 
as  it  means  that  women  in  general  may  expect  to  free  them- 
selves from  household  cares,  it  must  bring  vastly  greater 
disadvantages  both  to  women  and  to  society.  The  care  of 
consumption  is  entirely  worthy  of  being  the  chief  interest 
and  occupation  of  half  of  mankind.  The  unity  and  conti- 
nuity of  the  family  are  essential  for  the  due  exploitation  of 
^complementary  and  of  existential  utilities.l 

Social  atomization  is  destructive  of  both  moral  and  eco- 
nomic standards.  The  effectiveness  of  the  family  as  the 
custodian  of  the  standard  of  life  is  endangered  by  present 
tendencies.  A  high  standard  of  life  is  so  much  a  matter  of 


THE  STANDARD  OF  LIFE  AS  COMPLEMENTARY    97 

habit  and  tradition  that  it  needs  the  services  of  the  family  as 
its  transmitting  medium.  It  is  made  general  or  continued 
general  by  such  influences  as  are  represented  by  a  sound 
family  life.  The  social  importance  of  a  high  standard,  more- 
over, is  conditioned  upon  its  being  a  mass  fact.  If  a  high 
standard  controls  the  conduct  of  only  a  few,  it  must  be 
quickly  swamped. 

/?  The  standard  of  life  is  the  central  fact  in  the  dynamics  of 

I  consumption,  and  hence  is  of  dominant  importance  for  the 

^theory  of  economic  and  social  progress.^  For  the  purposes  of 

lEhls  analysis  of  utility,  however,  the  point  of  view  of  which 

is  essentially  static,  we  have  already  pursued  this  subject 

far  enough. 


CHAPTER   IX 

COMPLEMENTARY  UTILITY  IN  RELATION  TO  THE 
VARIATION  OF  UTILITY 

IF  the  principle  of  diminishing  utility  were  applicable  with 
anything  like  universality  and  absoluteness,  the  utility  of 
the  marginal  portion  of  income  or  consumption  would  vary 
inversely  as  the  amount  of  income.  The  strength  of  attach- 
ment with  which  a  man  with  a  moderate  income  holds  to 
the  consumption  of  articles  which  are  clearly  not  indispen- 
sable is  contrary  to  that  hypothesis.  His  judgment  of  their 
value  is  doubtless  due  in  part  to  the  influence  of  conven- 
tional social  standards  upon  him,  but  it  is  also  due,  or 
might  be  due,  to  an  entirely  rational  valuation  of  comple- 
mentary goods.  The  fact  that  the  individual's  judgment  is 
conventional  rather  than  justified  by  his  own  reasoning  does 
not  mean  that  his  estimation  of  the  utility  of  goods  essen- 
tial to  his  standard  of  life  is  any  the  less  reasonable. 
Viewed  in  the  concrete,  there  is  a  stage  in  the  acquisition 
iind  consumption  of  goods  within  which  the  principle  of 
diminishing  utility  does  not  hold,  or  at  any  rate,  does  not 
dominate  the  situation.) 

It  is  not  enough  to  meet  this  argument  by  limiting  di- 
minishing utility  to  the  case  of  a  homogeneous  supply.  The 
principle  never  has  been  so  limited.  It  is  of  too  great  signifi- 
cance in  economics  to  be  confined  within  such  bounds.  It 
does  apply  abstractly  to  the  increase  of  goods  in  their  most 
general  quantitative  aspect,  that  is,  to  the  amount  of  pos- 
sessions or  income  as  measured  in  terms  of  the  standard  of 
value.  A  dollar,  and  a  "dollar's  worth,"  has  less  utility  to 
the  well-to-do  business  man  than  to  the  day-laborer.  One 
hundred  dollars  or  one  thousand  dollars  mean  much  less  to 
the  very  rich  man  than  to  the  well-to-do.  If  these  propor- 


VARIATION  OF  COMPLEMENTARY  UTILITY    99 

tions  are  correct,  then  diminishing  utility  holds,  in  some 
sense,  for  income  in  general  and  for  the  goods  of  which,  in 
the  last  analysis,  it  consists. 

As  a  general  proposition,  assuming  the  rational  ordering 
of  consumption,  the  good  yielding  most  utility  will  be  first 
obtained,  then  the  one  having  the  next  greatest  utility,  and 
so  on  down.  The  application  of  initial  units  of  a  supply  to 
the  most  important  uses  first  and  then  the  progressive  de- 
crease of  the  importance  of  these  uses  means  diminishing 
utility.  But  this  situation  and  the  argument  based  upon  it 
apply,  not  only  to  a  homogeneous  supply,  but  equally  well 
to  a  heterogeneous  collection  of  goods  in  process  of  being 
acquired,  with  the  qualification,  of  course,  that  the  comple- 
mentary relations  of  the  heterogeneous  goods  be  left  out  of 
account.  Diminishing  utility  relates  to  particular  utility.  \ 
We  have  here  occasion  to  predicate  only  that  the  principle  j 
holds  for  the  particular  utility  of  a  varied  collection  of 
goods  as  well  as  for  a  homogeneous  supply.  s* 

The  variation  of  complementary  utility  is  another  matter. 
Complementary  utility  may  quite  disarrange  any  calcula- 
tions of  quantitative  variation  that  leave  it  out  of  account. 
Since  diminishing  utility  does  not  hold  for  complementary 
utility  by  itself,  it  does  not  always  hold  for  complementary 
utility  plus  particular  utility.  The  standard  of  life  is  a  case 
of  complementary  utility,  hence  its  influence  on  the  varia- 
tion of  the  utility  of  increments  of  income,  so  far  as  such 
increments  mean  something  for  the  standard.  Diminishing 
utility  does  not  hold  absolutely  and  step  by  step.  Even 
supposing  the  necessities  of  each  recipient  are  the  same, 
$100  may  in  the  concrete  mean  as  much  when  added  to  a 
particular  $2000  income  as  when  added  to  one  of  $1500. 
For  reasons  stated  elsewhere,  this  situation  holds  especially 
for  moderate  incomes. 

Curves  are  the  best  means  of  expressing  quantitative 
variation,  hence  a  discussion  of  subjective  economics  can 
scarcely  escape  using  them.  The  relation  of  the  complemen- 


100     WELFAKE  AS  AN  ECONOMIC  QUANTITY 

tary  character  of  successively  obtained  goods  to  the  varia- 
tion of  their  utility  may  best  be  illustrated  by  hypothetical 
curves.  The  typical  curve  of  diminishing  utility,  on  the 
assumption  that  it  expresses  the  relation  described  in  chap- 
ter in,  may  be  drawn  as  in  the  upper  half  of  Diagram  III. 

Now,  if  we  suppose  that  the  additions  to  the  number  of 
goods  available  for  consumption  consist  of  needed  articles 
of  furniture  instead  of  further  pecks  of  potatoes  or  loaves 
of  bread,  the  addition  of  these  articles  will  bring  utility 
not  merely  on  account  of  the  uses  to  which  they  may  them- 
selves be  put,  but  also  on  account  of  the  greater  com- 
pleteness with  which  the  home  is  furnished.  When  the 
"chunks"  of  commodity  are  reduced  to  like  units  as  to  a 
common  denominator,  the  particular  utility  proper  of  each 
article,  that  is,  the  utility  of  each  article  in  the  uses  to 
which  it  can  be  put  detached  from  others,  will  conform  to 
the  principle  of  diminishing  utility.  The  absolutely  needed 
articles  will  be  first  obtained,  owing  to  their  high  particular 
utility.  Others  will  follow  in  the  order  of  urgency  or  need 
relative  to  cost.  Complementary  utility  will  scarcely  count 
for  the  earlier  half  of  the  articles  obtained,  though  a 
rational  choice  will  pick  them  with  reference  to  the  future 
completion  of  a  harmonious  group  of  goods.  Complemen- 
tary utility  as  well  as  particular  utility  may  influence  the 
order  of  purchase  of  goods  later  acquired,  but  scarcely 
very  much,  since  the  amount  of  complementary  utility 
depends  more  upon  the  steps  still  to  be  taken  to  complete 
the  group  in  mind  than  upon  the  particular  characterjof 
the  good.  Particular  utility  will  unfailingly  follow  the 
principle  of  diminishing  utility.  Complementary  utility 
will  be  supplementary,  and  in  effect  a  premium  upon  the 
completion  of  the  group.  The  additional  or  complementary 
utility  will  thus  operate  to  modify  the  course  of  the 
variation  of  utility  as  represented  in  the  lower  half  of 
Diagram  III. 

There  should  be  no  question  as  to  the  possibility  of  the 


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VARIATION  OF  COMPLEMENTARY  UTILITY    103 

variation  of  utility  working  out  this  way.  The  practical 
significance  of  such  "increasing  utility"  is  evident. 

It  might  be  questioned  whether  the  complementary 
utility  belongs  to  the  units  to  which  it  is  credited.  But  the 
increase  in  the  number  of  goods  will  none  the  less  mean  such 
a  variation  in  the  quantity  of  utility  successively  added  as 
is  indicated.  The  apportionment  of  the  utility  to  the  sepa- 
rate units,  as  their  property,  is  not  essential.  It  is  just  as 
easy,  or  just  as  impossible,  to  pick  the  "first"  unit  out  of  a 
completed  supply  as  it  is  the  economically  "last"  or  mar- 
ginal unit.  The  existence  of  complementary  utility  is  no 
more  dependent  upon  its  inhering  in  a  particular  physical 
unit  than  is  the  existence  of  the  initial  or  of  the  marginal 
utility. 

As  to  whether  complementary  utility  is  fully  taken  into 
account,  as  particular  utility  is,  in  the  order  of  acquisition 
and  consumption,  a  small  portion  of  it  may  be  so  dealt 
with,  that  is,  so  far  as  a  particular  good,  let  us  say  the 
seventh  of  a  group  of  ten,  may  be  also  effective  to  some 
extent  as  completing  a  provisional  group  of  seven.  But 
most  of  the  complementary  utility  brought  by  the  tenth 
unit  is  due,  not  to  its  being  the  particular  good  which  it  is, 
but  to  its  being  the  tenth  of  a  group  of  ten.  Any  preceding 
unit  will  naturally  have  more  particular  utility,  but  it  is 
the  last  to  be  acquired  that  brings  most  complementary 
utility,  because  it  completes  the  group,  the  other  nine 
being  already  there.  Even  as  regards  the  seventh  unit 
mentioned  above,  whatever  complementary  utility  it  brings 
is  brought  because  it  is  the  seventh  and  last  unit  of  the 
provisional  group  of  seven.  The  complementary  utility 
thus  made  available,  while  it  gives  number  seven  prece- 
dence over  numbers  eight  and  nine  on  the  ground  of  degree 
of  utility,  may  also  mean  such  a  superiority  over  number 
six  that  its  coming  after  that  number  means  increasing 
utility. 

It  would  not  be  difficult  to  find  economists  who  would 


104    WELFARE  AS  AN  ECONOMIC  QUANTITY 

affirm  as  a  principle  without  qualification  that  food  is 
subject  to  the  law  of  diminishing  utility.  On  putting  this 
proposition  into  the  concrete  the  economist  will  most  likely 
confine  the  illustration  to  one  sort  of  food,  say  bread.  Then 
he  will  generalize  on  this  basis.  Let  us  see  if  the  principle 
of  diminishing  utility  does  adequately  formulate  the  quan- 
titative variation  of  utility  in  the  case  of  the  successive 
increments  —  mouthf uls,  forkfuls,  or  spoonfuls  —  of  a 
meal.  The  elasticity  of  consumption  groupings  will  have 
the  effect  of  making  any  illustration  somewhat  unreal.  But 
this  does  not  affect  the  principle.  It  is  proposed  to  apply 
the  principle  to  a  situation  that  is  entirely  concrete  and, 
though  hypothetical,  with  no  significant  elements  omitted. 
It  must  be  granted  that  the  consumer  is  to  control  the  order 
in  which  he  is  to  receive  the  increments,  this  being  a  neces- 
sary postulate  of  diminishing  utility.  To  reduce  our  mis- 
cellaneous foods  to  a  common  denominator,  we  shall  have 
to  take  a  money  measure  of  the  unit,  say  the  nickel.  Then 
suppose  the  choice  is  of  a  unit  of  each  of  the  following: 
Bread,  butter,  coffee,  dessert,  meat,  nuts,  potatoes,  salt, 
salad,  sauce,  soup,  sugar,  and  water.  In  order  to  keep  the 
particular  utility  of  each  unit  separate  in  thought,  suppose 
also  that  the  request  for  each  will  be  granted  only  after 
two  minutes,  or  that  this  much  time  must  elapse  between 
each  request. 

The  articles  being  chosen  by  a  hungry  man  with  refer- 
ence to  their  particular  utility  and  consumed  as  soon  as 
obtained,  the  order  might  be  meat,  bread,  water,  etc.  The 
man  would  doubtless  experience  a  diminution  of  utility 
for  each  successive  article  thus  immediately  and  separately 
consumed.  But  even  he  would  do  better  to  postpone  a  part 
of  the  consumption  in  order  to  avail  himself  of  complemen- 
tary utility.  He  would  want  salt  with  the  meat  and  butter 
with  the  bread. 

A  man  who  was  merely  comfortably  hungry  might  ask 
for  soup  first  or  perhaps  water.  He  certainly  would  not  ask 


VARIATION  OF  COMPLEMENTARY  UTILITY    105 

first  for  the  articles  from  which  he  expected  the  greatest  sat- 
isfaction. Furthermore,  he  would  probably  not  care  to  con- 
sume the  soup  until  he  had  salt,  bread,  and  butter,  to  go 
with  it.  Confined  to  the  above-mentioned  constituents  of  a 
modest  dinner,  he  would  next  choose  meat,  but  would  not 
care  to  eat  much  of  it  until  he  obtained  its  complements, 
potato,  salad,  and  perhaps  meat  sauce.  He  already  has 
salt.  He  would  then  want  an  increment  of  coffee,  and  of 
sugar,  again  as  complements.  Presumably  he  would  want 
dessert  with  these.  His  bill  of  fare  might  be  arranged  thus 
(the  items  to  be  read  horizontally):  — 

Water 

Soup  Salt  Bread  Butter 

Meat  Potatoes        Vegetable  salad  Meat  sauce 

Dessert  Coffee  Sugar  Nuts 

But  the  full  importance  of  complementary  utility  is  not 
measured  by  the  effect  of  the  strictly  contemporaneous 
combinations  that  could  be  made.  Soup  comes  before  meat 
because  that  is  the  proper  order  in  which  to  get  the  benefit 
of  the  complementary  utility  that  results  from  their  being 
grouped.  The  entire  meal,  with  its  setting,  is  a  single  group 
of  complementary  goods.  The  satisfaction  obtained  from  it 
has  little  or  nothing  to  do  with  diminishing  utility.  The 
reason  is  that  the  utility  of  the  meal  is  chiefly  complemen- 
tary in  its  nature. 

The  illustration  is  open  to  criticism  in  one  particular.  It 
might  be  claimed  that  the  consumer  should  be  compelled 
to  choose  each  unit  as  if  it  were  the  last  in  order  that  he 
might  have  a  motive  to  take  account  of  all  possible  particu- 
lar utility  at  each  step  and  would  not,  for  example,  ascend 
from  soup  to  meat.  This  situation  would  limit  the  possi- 
bility of  obtaining  complementary  utility,  but  in  a  way 
unjust  to  it,  for  planning  would  no  longer  be  possible. 
Perhaps  the  proper  modification  to  be  made  in  the  illustra- 
tion would  be  to  follow  the  variation  of  utility  as  between 
fixed  supplies  or  combinations  of  the  articles  of  different 


106     WELFARE  AS  AN  ECONOMIC  QUANTITY 

extent  chosen  from  such  a  list  as  the  one  used  above.  But 
this  would  involve  such  complexities  in  the  illustration  as 
to  make  it  no  longer  feasible  here.  As  regards  the  real 
utility  of  the  initial  units  of  a  very  limited  supply  of  food, 
moreover,  it  is  doubtful  whether  the  hypothesis  of  a  fixed 
supply  would  not  introduce  a  grave  error,  as  shown  in  a 
later  chapter,1  on  account  of  the  possible  transputed  charac- 
ter of  such  utility.  Certainly  complementary  utility  would 
be  a  factor  in  the  choice  of  marginal  units  after  the  fear  of 
not  having  enough  to  satisfy  exigent  need  was  passed,  and 
sometimes  it  would  be  highly  enough  appreciated  to  modify 
the  course  of  the  utility  curve  radically.  Additions  to 
existing  supplies,  furthermore,  may  be  made  in  the  light  of 
new  knowledge  of  complementary  possibilities,  and  even 
though  this  is  a  dynamic  factor,  complementary  utility 
should  receive  credit  for  it.  Perhaps  this  new  light  means 
no  more  than  the  ingenuity  necessary  to  find  any  uses  at 
all  for  the  later  units  of  the  abundant  supply  for  which 
diminishing  utility  is  of  dominant  significance. 

That  the  appropriate  association  of  different  foods  has  a 
very  great  deal  to  do  with  the  satisfaction  obtained  from 
them  every  one  knows  who  has  sat  waiting  in  a  restaurant 
for  a  group  to  be  completed.  That  the  groupings  will  be 
different  according  to  personal  idiosyncrasy  adds  another 
to  the  difficulties  in  the  way  of  finding  illustrations  that  will 
be  generally  understood  and  appreciated.  But  the  signifi- 
cance of  complementary  utility  is  not  therefore  less  great, 
but  only  the  more  likely  to  be  not  duly  recognized. 

An  illustration  along  the  lines  of  the  dinner  might  be 
worked  out  for  the  furnishing  of  a  house. 

In  order  that  the  principle  of  diminishing  utility  may  be 
overborne,  it  is  not  necessary  that  the  effect  of  complemen- 
tary utility  should  amount  to  absolutely  increasing  utility, 
though  there  is  no  reason  why  it  cannot  on  occasion.  The 
hump  on  the  curve  of  diminishing  utility  may  be  there  still, 
1  Chap.  xi. 


VARIATION  OF  COMPLEMENTARY  UTILITY    107 

even  though  its  upper  edge  be  no  more  than  horizontal. 
This  is  illustrated  in  Diagram  IV,  opposite  page  103.  Of 
course  we  are  assuming  that  the  principle  of  diminishing 
utility  works  with  a  degree  of  regularity,  and  that  the 
rate  of  decline  is  not  arbitrary. 

That  the  principle  of  diminishing  utility  is  often  over- 
borne depends  upon  the  fact  that  consumption  groupings 
are  provisional  and  elastic  and  that  there  is  always  likely  to 
be,  so  to  speak,  a  stock  of  complementary  relations  avail- 
able and  waiting  for  the  accumulation  of  purchasing  power. 
Complementary  utility  is  not  something  obtained  once  for 
all.    Its  accessions  educate  to  new  outlooks  and  further! 
ambitions.   It  is  thus  a  factor  in  the  estimation  of  most  1 
purchases,  though  not  always  highly  important.  ^^ 

The  effect  upon  utility  of  the  obtaining  of  a  comple- 
mentary good  may  be  paradoxically  described  as  analogous 
to  the  addition  of  2  plus  2  to  make  5.  Certainly  the  sum  of 
the  particular  utilities  of  the  complementary  goods  does 
not  equal  the  utility  of  the  group  as  a  whole.  It  is  only  in 
physics  that  £  plus  2  equals  4,  no  more,  no  less.  In  psychi- 
cal matters,  under  the  operation  of  the  principle  of  dimin- 
ishing utility,  2  plus  2  equals  only  3,  or  perhaps  3)^.  But  it 
is  equally  possible  for  £  plus  £  to  amount  to  4  or  4J^  or  5, 
provided  the  second  £  is  a  complement  of  the  first.  We  are 
too  much  tied  down  to  the  objective  and  the  physical  in 
our  conception  of  quantities  and  quantitative  relations, 
and  if  we  escape  that,  we  too  often  fail  to  perceive  the  bear- 
ing of  the  complementary  relation  on  the  variation  of  utility, 
because  to  observe  that  relation  we  need  to  have  the  group 
already  formed  before  us.  We  are  thus  too  likely  to  con- 
template the  relation  merely  as  a  result,  instead  of  as  a 
process,  thus  missing  the  variation  of  complementary 
utility. 

This  reasoning,  according  to  which  2  plus  2  may  equal, 
not  only  4,  but  also  either  3  or  5,  may  appear  to  the  reader 
fallacious.  Formally,  so  it  is.  But  the  idea  nevertheless  is 


108     WELFARE  AS  AN  ECONOMIC  QUANTITY 

practically  sound  and  its  mode  of  expression  pertinent.  The 
2  and  2  are  of  course  physical  objects.  The  sum  or  result  of 
their  combination  may  be  either  physical  or  psychical. 
When  it  is  psychical  there  is  no  reason  why  it  should  be 
invariably  proportionate  to  the  number  of  physical  units 
rather  than  proportionate  to  less  or  more  than  their  sum. 
/  For  the  study  of  the  quantitative  variation  of  utility, 
it  is  the  effect  of  the  introduction  of  the  completing  good 
that  is  important.  The  group  once  formed,  the  last  ac- 
quired complement  loses  its  distinction,  and  the  comple- 
mentary utility  obtained  is  correctly  thought  to  be  no  more 
connected  with  it  than  with  any  other  member  of  the  group. 
/If  there  is  a  "law"  of  increasing  utility,  it  is  in  a  sense 
/  dynamic  in  its  nature.  But  this  is  equally  true  of  diminish- 
1  ing  utility.  A  merely  static  reckoning  with  particular 
'  articles  of  consumption  need  take  account  of  neither.  But 
in  this  sense  all  expenditure  for  goods  that  are  not  promptly 
destroyed  by  use  is  dynamic.  The  furnishing  of  a  house 
from  the  income  of  a  newly-married  couple  is  not  mainte- 
nance, it  is  development.  Even  the  consumption  of  food 
among  the  comfortably  situated  is  not  usually  entirely 
static.  The  chief  dynamic  phenomenon  of  consumption  is, 
perhaps,  this  founding  of  new  groups  of  complementary 
goods. 

It  is  natural  that  the  effect  upon  the  course  of  utility  of 
the  adding  of  like  goods  to  the  number  of  those  available 
for  consumption  should  first  attract  attention,  and  that  it 
should  still  cause  neglect  of  the  effect  of  the  complementary 
relation  in  consumption.  It  requires  unusual  importance  of 
the  groupings  and  a  very  special  situation  to  produce  such  a 
degree  of  divergence  from  the  typical  course  of  utility  that 
added  increments  of  goods  shall  have  an  increasing  utility, 
though  that  effect  is  possible.  Nothing  less  than  such  in- 
creasing utility  could  attract  the  attention  of  those  who 
find  no  law  for  the  rate  of  diminution  of  utility  and  accept 
without  question  any  downward  rate  or  succession  of  rates. 


VARIATION  OF  COMPLEMENTARY  UTILITY    109 

The  scope  of  complementary  utility,  however,  is  not  con- 
fined to  its  extreme  effects,  though  its  tendency  to  counter- 
act diminishing  utility  is  thus  best  illustrated.  Since  homo- 
geneity and  correlational  or  complementary  heterogeneity 
may  both  hold  as  different  aspects  for  the  same  collection 
of  goods,  both  laws  of  variation  may  be  conceived  to  be 
coincidently  applicable.  Complementary  utility  is  thus 
manifested  as  a  cause  of  upward  deviation  from  the  regular 
form  of  the  curve  of  diminishing  utility.  But  this  relatively 
upward  direction  of  the  curve  may  still  be  absolutely 
downward  or  merely  level.  The  suspension,  rather  than 
the  reversal,  of  the  diminution  of  utility  is  what  is  to  be 
expected. 

As  compared  with  the  upward  variation  due  to  comple^- 
mentary  utility,  diminishing  utility  may  be  said  to  be  mor^ 
objective  or  demonstrable.  This  may  be  because  the  latter* 
is  favored  by  the  somewhat  extraneous  fact  that  there  is 
such  a  thing  as  physical  homogeneity  of  goods,  while  the 
peculiar  kind  of  unlikeness  required  for  the  complementary 
relation  is  altogether  dependent  upon  psychical  factors.; 
Homogeneity  may  be  such  only  from  the  point  of  view  of 
the  consumer  and  still  occasion  the  diminution  of  utility. 
But  the  evidence  for  the  principle  of  diminishing  utility  is 
not  mainly  of  this  less  convincing  sort;  while  the  counter- 
acting influence  or  opposite  course  of  complementary 
utility  always  requires  attention  to  something  less  close  to 
the  physical.  Only  in  the  field  of  production  may  we  find 
clear  and  thoroughly  objective  cases  of  the  complementary 
relation,  and  here  the  end  and  criterion  of  the  interrelation 
is  technical,  having  no  direct  reference  to  satisfaction. 
Here  also  substitution  and  the  instability  of  groups  ob- 
scures the  significance  of  complementary  interdependence, 
at  least  if  we  have  in  mind  concrete  groups  instead  of  the 
interdependent  "factors  of  production."  If  we  have  to 
assume  a  given  state  of  engineering  knowledge  and  un- 
changing relative  prices  in  order  to  make  complementary 


110     WELFARE  AS  AN  ECONOMIC  QUANTITY 

relations  in  production  stable,  even  that  is  easier  than  to 
assume  as  much  in  the  field  of  consumption  and  to  as- 
sume also  a  standardized  and  constant  affective  valua- 
tion. Physical  likeness  is  a  hard  and  fast  fact  while  com- 
plementariness  is  a  matter  of  judgment  and  taste.  The 
corresponding  principles  of  the  variation  of  utility  par- 
take of  these  characteristics. 

There  is  a  better  argument  for  the  underlying  character 
of  the  principle  of  diminishing  utility.  For  an  abstract 
kind  or  element  of  utility,  like  time-keeping  utility,  di- 
minishing utility  must  hold  unqualifiedly.  The  utility  of 
the  normal  sitting  position  —  as  sharply^Jefined  and  dis- 
tinguished, not  only  from  standing  and  reclining,  but  also 
from  various  intermediate  positions  such  as  may  be  as- 
sumed in  a  rocker,  Morris,  or  swivel  chair  —  is  more  cer- 
tainly subject  to  diminution  than  is  the  utility  of  the  genus 
chair,  with  its  many  species.  The  complementary  relation 
and  the  resulting  possibilities  of  increasing  utility,  on  the; 
other  hand,  require  concrete  objects  or  acts;  for  example, 
the  chair  and  the  appropriate  occupation  of  it  as  to  place 
and  time.  Abstract  elements  of  utility  as  such  do  not  ap- 
pear to  be  complementary  to  one  another.  It  is  at  least  safe 
to  say  that  they  do  not  get  beyond  mere  contrast  effects. 
The  complementary  or  part-utilities  of  the  members 
of  a  group  are  only  potential  until  the  group  is  formedJ 
The  several  goods  must  be  combined  in  order  that  the  com- 
plementary kind  of  utility  may  exist.  Of  course  the 
members  of  the  group  will  have  also  their  independent 
particular  utilities. 

/Particular  utility,  furthermore,  practically,  if  not  ab- 
solutely, always  underlies  complementary  utility,  and  for 
particular  utility,  so  far  as  it  can  be  separated,  diminish- 
ing utility  holds  in  all  cases  where  consumption  is  ration- 
ally ordered.  A  congeries  of  goods  always  has  a  collective 
particular  utility,  whether  or  not  it  has  also  complemen- 
tary utility  due  to  internal  relations. 


VARIATION  OF  COMPLEMENTARY  UTILITY    111 

One  cause  of  the  obscuration  of  the  effect  of  the  com- 
plementary relation  on  the  variation  of  utility  as  applied 
to  ordinary  concrete  groups  is  the  fact  that,  once  a  group 
is  completed,  the  utility  of  added  goods  may  be  expected 
to  drop  rapidly  enough  to  balance  the  previous  retardation 
of  decline  and  to  make  the  effect  of  the  complementary 
relation  temporary,  or  only  a  "hump"  on  the  curve  of 
^^diminishing  utility.)  This  double  effect  is  less  of  an  objec- 
tion than  it  seems,  for  these  groupings  in  consumption  are 
elastic  and  multifarious.  In  practice  it  is  to  be  expected 
that  consumption  will  proceed  up  to,  but  not  beyond,  such 
a  sharp  drop  in  utility,  and,  the  one  group  having  been 
completed,  some  other  group  will  be  attended  to.  Within 
the  zone  of  moderate  expenditure  there  is  no  end  to  the 
possibilities  of  improvement  of  groups  by  additions  and 
modifications. 

Since  complementary  utility  is  always  the  utility  proper 
of  some  group,  it  may  be  said  that  diminishing  utility  holds 
for  the  utility  of  the  successive  groups  of  the  same  kind, 
and  in  this  way  for  complementary  utility.  The  consumer 
is  supposed  to  increase  the  number  of  this  kind  of  group 
until  its  utility,  including  the  complementary  part,  becomes 
marginal.  Doubtless  this  would  hold  if  the  consumption  of 
the  individual  proceeded  to  the  formation  of  several  like 
groups.  But  the  maxim  of  variety  is,  "One  of  a  kind  is 
enough."  The  more  important  groups  are,  moreover,  so 
large  as  to  be  almost  inclusive  of  the  entire  consumption 
,  of  the  individual  or  family.  A  group  is  typically  a  sort  of 
department  of  consumption.  Duplication  of  such  a  group 
must  be  exceptional,  though  it  is  conceivable  for  the  econ- 
omy of  the  very  rich.  Most  people  have  to  be  content  with 
one  house  and  one  outfit  of  furniture.  Even  where  dupli- 
cation is  possible,  the  new  group  is  likely  to  be  more  or 
less  complementary  to  the  old.  A  gentleman's  country 
home  is  not  so  much  another  unit  added  to  his  supply  of 
houses  as  it  is  a  complement  of  his  city  house.  In  general, 


113     WELFARE  AS  AN  ECONOMIC  QUANTITY 

one  group  of  a  kind  suffices.  [There  is  no  such  thing  as  a  | 
supply  of  homogeneous  group-units  with  a  marginal  group  | 
for  the  least  important  use.( 

The  principle  of  diminishing  utility  applies  to  comple- 
mentary utility  only  in  the  sense  that  the  group  richest  in* 
complementary  utility,  other  things  being  equal,  will  be 
formed  first,  the  next  richest  second,  and  so  on.  But  this 
amounts  to  saying  that  the  principle  of  diminishing  utility 
has  no  practical,  and  scarcely  any  theoretical,  significance  • 
for  complementary  utility,  however  absolutely  it  applies, 
of  course  abstractly,  for  particular  utility.)  Among  other 
things  that  must  be  equal  are  the  size  of  the  groups,  the 
particular  utilities  of  the  parts  of  the  different  groups,  and 
also  the  relation  between  costs  and  particular  utilities. 
These  things  cannot  be  presumed  to  remain  the  same 
through  a  series  of  groups.  (The  situation,  furthermore, 
should  not  be  complicated  by  relations  between  groups,  a 
thing  very  frequent  in  actual  consumption,  so  frequent  in 
fact  that  the  very  supposition  of  a  mere  series  of  groups,  as 
opposed  to  a  group  of  groups,  is  quite  artificial.  Therefore 
complementary  utility  may  without  qualification  be  said 
to  obey  a  different  law  from  that  of  particular  utility^ 
Only  in  so  far  as  the  group  is  small  enough  and  fixed  enough 
to  be  thought  of  in  market  transactions  and  recognized  in 
the  economy  of  many  consumers  will  there  be  adjustments 
of  the  market  to  take  account  of  complementary  utility  as 
there  are  in  the  case  of  particular  utility.  That  demand 
and  the  market  will  be  unaffected  by  complementary  util- 
ity is,  however,  a  different  proposition. 
rDomplementary  utility,  as  has  been  stated  before,  does 
not  reside  in  or  adhere  to  any  particular  good.  This  fact 
of  itself  must  defeat  the  market  and  marginal  conception. 
It  is  for  similar  reasons  that  super-marginal  utility  is  not 
taken  account  of  in  the  market. 

^But,  though  complementary  utility  does  not  diminish 
according  to  the  variation  law,  it  does  not  follow  that  it 


VAEIATION  OF  COMPLEMENTARY  UTILITY    113 

can  go  on  increasing  forever  and  be  unlimited  in  amount. 
It  is  limited  by  capacity  to  enjoy.  While  its  limit  is  more 
elastic  than  that  for  any  other  species  of  utility,  and  while 
it  is  the  most  genuinely  fruitful  recourse  of  pampered  and, 
jaded  sensibilitiesJthe  capacity  of  no  individual  is  equal 
to  exploiting  all  its  possibilities,  especially  as  its  enjoy- 
ment is  so  little  passive  and  so  largely  exigent  of  activq  j 
attention  and  systematic  interest./  Especially  for  the  per- 
son whose  time  is  not  mainly  leisure  time,  there  is  need 
of  checking  the  development  of  complexity  of  life  in  this, 
as  in  other  respects. 

Adequate  attention  to  complementary  utility,  we  con-J 
elude,  requires  a  decided  modification  of  current  concep-/ 
tions  of  the  character  and  of  the  variation  of  utility; 
Diminishing  utility,  it  is  true,  retains  its  fundamental- 
importance.  In  the  realm  of  very  general  (and  therefore 
very  abstract)  principle  it  counts  for  more  than  the  comple- 
knentary  relation.  But,  in  concrete  dealings  with  goods, 


degree  of  complementary  utility  is  of  quite  as  much  practi- 
cal importance  in  motivation  and  choice  as  is  the  variation 
of  particular  utility.  Here  complementary  utility  occupies 
the  foreground.  That  its  scientific  interest  has  not  been 
duly  recognized  may  be  attributed  to  the  fact  that  the 
viewpoint  of  the  economist  has  usually  been  that  of  the 
merchant  rather  than  that  of  the  consumer,  and  also  to 
the  fact  that  the  economist  is  seldom  much  of  a  psycholo- 
gist. The  complementary  relation  is  so  significant  for  de- 
gree of  realizable  utility  that  it  should  be  given  as  large  a 
place  as  diminishing  utility  itself  in  an  adequate  discussion 
of  consumption  and  of  the  variation  of  utility. 


CHAPTER   X 

IMPUTATION  AND   TRANSPUTATION  OF  UTILITY 

TRANSPUTED  utility  has  been  described  above  as  due  to  a 
relation  of  one  good  to  another  such  that  the  full  enjoyment 
of  the  second  is  felt  to  be  practically  and  exigently  de- 
pendent upon  the  control  of  the  firsO  The  transputed 
utility  is  thus  superposed  upon  other  kinds  of  utility,  in- 
cluded among  them  being  complementary  utility  as  ordi- 
narily or  equitably  attributed  to  the  various  members  of  a 
group.  This  conception  is  different  from  the  Austrian  con- 
ception of  imputation  in  so  far  as  that  does  not  distinguish 
'merely  complementary  utility  from  the  stronger  case.  The 
reason  for  this  is  doubtless  the  fact  that  the  Austrians  give 
attention  to  utility  only  as  the  foundation  of  economic 
value  and  then  proceed  to  study  the  imputation  of  value  as 
between  intermediate  goods,  where  only  value  and  not 
utility,  in  so  far  as  super-marginal,  is  significant.  In  so  far 
as  economic  value  is  founded  upon  complementary  utility, 
utility,  since  it  is  of  direct  significance  in  the  market,  is  also 
imputed.  Whether  we  may  say  that  it  is  also  transputed 
would  depend  upon  whether  the  concentration  of  value 
upon  one  or  few  members  of  the  group  would  signify  any- 
thing of  human  interest,  that  is,  mainly  as  regards  the 
character  and  benefits  of  consumption.  The  one  case  where 
such  imputation  does  become  transputation  is  where  labor 
gets  relatively  little  jof  the  joint  product  of  all  productive 
agents  and  the  material  elements  get  most.  But  let  us  first 
consider  imputation  in  the  usual  way  and  in  its  established 
:  field. 

IThe  clearest  case  of  the  imputation  of  value  is  to  be  seen 
in  the  apportionment  of  the  commercial  value  of  products 
among  the  factors  of  production.  The  interrelations  of  the 


TRANSPUTATION  OF  UTILITY  115 

available  supplies  of  productive  agents  result  in  the  impu- 
tation of  the  value  jointly  produced  to  the  various  agents 
in  proportion  to  their  relative  scarcity.  Under  the  name 
of  joint  demand,  this  situation  had  been  described  before 
Carl  Menger's  time,  but  the  Austrian  conception  is  so 
much  more  adequate  as  to  be  entitled  to  the  honors  that 
are  due  to  scientific  discovery!  The  problem  of  distribu- 
tion is  a  problem  of  imputation  resulting  from  the  divided 
control  of  means  of  production.  The  relative  value  of  com- 
plementary agents  thus  separately  controlled  and  con- 
stituting conflicting  social  interests  is  a  very  practical 
question. 

I  The  simplest  case  of  imputation  in  production  is  that 
/where  all  the  means  but  one  are  free  goodsl  This  is  the 
ideally  primitive  condition,  where  a  man  has  to  consider 
only  the  cost  of  his  own  labor,  since  his  materials  are  free 
of  other  costs  and  Ijiis  productive  efforts  are  unassisted  by 
those  of  other  men.  1  Under  such  circumstances  all  the  value 
[  of  the  product  is  imputed  to  labor,  j  But  at  the  present  time 
the  laborer  no  longer  receives  "the  whole  produce  of  labor." 
In  the  countries  most  advanced  in  civilization,  free  goods 
are  of  decreasing  economic  importance,  and  production  is 
typically  joint-production,  involving  the  efforts  of  many 
laborers,  directive  and  other.  Under  such  circumstances 
the  commercial  value  of  means  of  production,  which  is 
imputed  value  to  such  an  extent  that  any  other  value  is 
hardly  to  be  distinguished,  varies  inversely  as  replace- 
ability.  Some  kinds  of  laborers,  moreover,  are  among  the 
most  easily  replaced  means  of  production.!  The  theory  o| 
rent,  both  of  land  and  of  superior  ability,  if  we  may  speak  of 
the  "rent"  of  ability,  is  also  a  corollary  of  the  doctrine  of 
imputation,  j  The  peculiarity  of  this  part  of  income  from 
property  depends  upon  two  facts,  that  the  supply  of  land  is 
relatively  fixed,  and  that  the  land  is  relatively  irreplace- 
able. So  much  for  imputation  in  the  sphere  of  commercial 
value. 


116     WELFARE  AS  AN  ECONOMIC  QUANTITY 

Monger,  Wieser,  and  Bohm-Bawerk  fail  to  bring  over 
tese  principles  of  the  complementary  relation  and  of  im- 
uted  value  from  the  sphere  of  production  and  sale  into 
at  of  immediate  utility.   The  principles  are  to  be  con- 
sidered the  outcome  of  subjective  laws  of  the  enjoyment 
and  estimation  of  goods  under  limiting  conditions  of  abso- 
lute and  relative  supply.   They  should  therefore  find  ex- 
pression in  the  field  of  consumption.  The  complementary 
relation  has  already  been  shown  to  be  of  an  importance  in 
this  field  hardly  to  be  overestimated.   Imputation,  or  the 
special  case  to  which  the  distinctive  name  transputation 
is  here  given,  is  in  its  peculiar  way  hardly  less  significant. 
f    In  the  Austrian  conception  "imputation"  (Zurechnung) 
I  is  used  to  designate  the  process  by  which  the  value  of  a 
/  joint  product  of  several  factors  is  apportioned  between 
I  them.1   The  contrast  between  this  process  and  the  division 
of  a  common  store  between  contributors  in  proportion  to 
the  physical  contributions  they  have  made  to  it  is  highly 
significant.    The  analogy  to  the  judicial  imputation  of 
guilt  in  a  difficult  case  when  the  physical  facts  relating  to  a 
misdeed  are  known  is  instructively  developed  by  Wieser.2 

1  According  to  the  etymology  of  the  word,  the  term  "imputation" 
might  cover  the  attribution  of  utility  or  value  generally,  without  regard 
to  joint  effects  or  the  complementary  relation.  Or  it  might  have  the 
sense  of  injurious  or  false  attribution,  for  example,  the  comprehensive 
remedial  effects  "imputed"  to  whiskey  by  the  person  with  a  special  ap- 
-petite  for  it.f  Patten  (Dynamic  Economics,  chap,  xix,  "The  Imputation 
of  Utility")  states  various  "laws"  of  imputation  (attribution)  of  utility 
in  consumption,  —  a  problem  which  the  present  essay  no  more  than 
touches  (cf.  p.  120).  The  present  writer  does  not  use  the  term  in  this  broad 
sense  but  supposes  that  imputation  is  not  only  a  phenomenon  of  the  com- 
plementary relation  but  also  implies  a  definite  result  such  as  is  obtained  in 
the  field  of  economic  value  and  distribution.  Hence  utility  in  his  view  is 
imputed  only  when  it  becomes  quantitatively  definite  as  economic  value^ 


is  entirely  in  accord  with  Austrian  usage. 

On  p.  121  of  Dynamic  Economics  it  appears  that  Professor  Patten  con- 
siders as  imputed  only  the  complementary  utility  of  a  group  over  and 
above  the  particular  utility  of  the  individual  units.  The  theory  of  trans- 
putation has  the  same  starting  point. 

2  Natural  Value  (translation),  1893,  book  in,  part  I,  chap.  n.  Simi- 
larly in  his  Ursprung  und  Hauptgesetze  des  wrtschaftlichen  Werthes, 
1884,  p.  172. 


TRANSPUTATION  OF  UTILITY  117 

Imputation  is  essentially  a  mental  operation,  a  phase  of 
ithe  judgment  of  value.  But  it  should  be  noted  that  the 
'attribution  of  utility  to  an  object  or  collection  of  objects  is 
just  as  much  a  judgment  of  value  as  is  the  offer  to  pay  a 
definite  money  price  in  exchange  for  it.  In  other  words, 
value  in  its  broadest  sense  is  a  genus  of  which  utility  is  a 
species.  When  imputation  is  said  to  be  a  phase  of  the  judg- 
ment of  value,  there  is  a  presumption  that  it  has  signifi- 
cance for  utility  and  consumption  as  well  as  for  economic 
production  and  distribution.  But  the  peculiarities  of  the 
conception  in  this  newer  application  make  it  advisable  to 
use  a  somewhat  different  term,  that  is,  "transputation."1  \ 

The  current  idea  of  imputation  in  distribution  assumes 
that  all  value  to  be  divided  among  productive  agents  is 
imputed  to  one  or  another  of  them,  and  thus  all  may  be 
called  imputed  value.  This  is  different  from  our  concep- 
tion of  transputation  in  consumption,  according  to  which 
only  some  portion  of  the  complementary  utility  of  a  group 
may  ordinarily  be  transputed  to  one  member.  In  consump- 
tion it  is  not  true  that  all  the  complementary  utility  of  a 
group  is  imputed  to  one  or  more  of  its  several  members, 
nor  that  the  good  favored  has  only  the  utility  that  it 
derives  from  imputation.  But  the  current  conception  of 
imputation  in  distribution  and  the  writer's  use  of  the  idea 
of  transputation  in  consumption  differ  from  each  other 
mainly  in  that  the  whence  and  not  merely  the  whither  of 
the  utility  in  question  is  taken  into  consideration  in  the 
second  case.  I 

/  Under  modern  conditions  of  production,  which  require 
complicated  processes  and  implements  and  highly  devel- 
oped skill,  it  is  clear  that  the  value  of  an  instrument  (or  of 
a  laborer)  apart  from  complements  would  be  practically 
nil.  Hence  all  the  utility  or  value  of  productive  agents  may 
be  considered  imputed.  Many  consumption  goods,  how- 
ever, can  be  put  to  some  use  with  only  free  goods  as  com- 
1  Defined  and  discussed  on  p.  14. 


118     WELFARE  AS  AN  ECONOMIC  QUANTITY 

plements,  or  even  with  no  complements  at  all.  The  apple 
and  other  fruits  are  often  eaten  as  they  come  from  the  tree. 
The  majority  of  consumption  goods  can  be  enjoyed,  though 
k  to  less  advantage,  without  the  help  of  other  goods.  But 
the  individual  or  "particular"  utility  of  a  productive  agent 
is  approximately  zero.  On  the  other  hand,  super-marginal 
utility  of  any  sort,  including  unimputed  complementary 
utility,  has  little  or  no  significance  in  the  field  of  interme- 
diate goods.  Here  value  is  a  sufficient  measure  of  utility. 
The  initial  utility  of  such  goods  might  be  much  greater 
than  their  actual  marginal  utility.  But  the  relatively  lib- 
eral supply  causes  a  reduction  of  prices  for  the  correspond- 
ing final  goods  such  that  whatever  high  degree  of  utility 
they  may  have  for  their  consumers  is  not  reflected  through 
the  market  to  the  intermediate  goods.  Whether  it  might 
not  still  be  traced  from  a  more  general  and  social  view- 
point we  will  not  undertake  to  consider.  It  makes  no  dif- 
ference as  regards  the  value  of  productive  agents  whether 
some  of  their  products  achieve  a  high  or  a  low  degree  of 
realized  utility.  For  the  individual  consumer,  on  the  con- 
trary, it  does  make  a  difference  whether  he  can  realize 
much  or  little  utility  from  what  he  acquires,  regardless  of 
the  fact  that  he  will  pay  as  low  a  price  as  the  market  will 
permit.  Thus  imputation  operates  somewhat  differently  in 
consumption  from  the  way  it  does  in  production,  or  per- 
haps we  should  say  that  imputation  has  no  such  compre- 
hensive scope  in  consumption  as  in  production  and  that, 
within  its  sphere  of  influence,  it  acquires  new  interest  as 
usually  constituting  transputed  utility. 

The  distinction  between  transputed  utility  and  utility 
proper  is  worthy  of  further  emphasis  at  this  point,  f  Utility 
proper  is  due  to  the  intrinsic  qualities  of  a  good  (or  of  al 
group  of  goods),  of  course  with  reference  also  to  its  ownJ 
supply.l  $ut  the  utility  proper  of  an  individual  good  is  not 
practically  dependent  upon  any  relation,  quantitative  or 
other,  to  objects  of  different  kind,  or  to  the  qualities  or  the 


TRANSPUTATION  OF  UTILITY  119 

I 

supplies  of  such  objects.1/  Transputed  utility,  on  the  other 
hand,  derives  its  being  from  a  relation  to  other  goods.  It  is 
thus  hardly  to  be  considered  utility  in  the  full  sense,  or 
rather  it  is  not  utility  rightfully  belonging  to  the  good  to 
which  it  adheres.  It  is  a  transferred  utility.  It  is  taken 
from  the  utility  of  other  goods  and  added  to  that  of  the 
good  favored  by  transputation.)  The  utility  of  the  group  is 
of  course  determined  by  the  principles  that  govern  the 
utility  of  any  complete  good. 

The  transputed  utility  of  a  complement  is  part  of  the 
proper  utility  of  a  complete  good  or  group.  This  is  also  the 
case,  perhaps  in  a  higher  degree,  with  the  merely  comple- 
mentary utility  of  such  an  article.  Merely  complementary 
utility  may  Jbe  apportioned  among  the  members  of  the 
group,  but,  unless  it  becomes  transputed  and  ceases  to  be 
merely  complementary,  it  is  not  so  apportioned  as  to  give 
to  any  of  them  a  firm  hold  on  a  definite  share  of  the  pe- 
culiarlv  group  utility,  or,  so  to  speak,  a  proprietary  right 
in  it.  Transputation^  on  the  other  hand,  ^hunts  off  to  ond 
member  of  the  group  more  than  its  proportion  of  the  joint] 
utility,  j  The  utility  so  shunted  expresses  itself  in  a  defi> 
nite  value  and  may  pertain  to  the  favored  article  for 
some  time,  as  in  a  state  of  equilibrium.  The  distribution 
of  merely  complementary  utility  is  as  indefinite  as  is  the 
sense  of  proportion.!  In  considering  the  utility  of  a  given 
article,  however,  the  distinction  between  the  merely  com- 
plementary and  the  transputed  portion  may  be  more  defi- 
nite. Doubtless  this  sense  of  proportion  will  be  somewhat 
guided  by  the  importance  of  the  complement  for  other 
uses,  especially  familiar  isolated  or  independent  uses.  The 
difficulty  of  drawing  a  sharp  division  line  between  trans- 
puted and  merely  complementary  utility  does  not  make 
the  distinction  less  important.  The  reader  may,  if  he  will, 
consider  them  two  aspects  of  the  same  thing. 

Transputed  utility  may  be  described  as  monopolized 
1  Cf.  pp.  12-13. 


120     WELFARE  AS  AN  ECONOMIC  QUANTITY 

complementary  utility.  But  this  is  not  the  best  way  of 
characterizing  what  happens  to  the  surplus  above  par- 
ticular utility  in  cases  of  transputation.  Although  it  is  true 
there  are  various  degrees  of  monopolization,  still  we  should 
not  be  inclined  to  call  by  that  name  a  small  disturbance 
of  the  balance  between  different  claimants  to  complemen- 
tary utility.  Transputation  seems  to  be  the  more  accu- 
rate, as  well  as  the  more  distinctive,  term. 

This  brings  us  to  the  question  as  to  how  to  determine 
what  is  a  balanced  and  what  an  unbalanced  attribution  of 
complementary  utility  among  the  claimants  to  a  share. 
The  author  is  doubtful  whether  particular  utility  outside 
complementary  groups  affords  a  satisfactory  criterion, 
even  conceptually,  and  this  is  certainly  not  a  good  work- 
ing solution.  There  remains  the  possibility  of  a  physical 
criterion.  But  no  definite  and  hard  and  fast  criterion  is 
indispensable  where  the  whole  matter  hinges  upon  the 
sense  of  proportion.  Moreover,  to  develop  in  this  connec- 
tion a  scale  of  physical  qualities  with  reference  to  the  degree 
of  their  realization  due  to  complementary  groupings  is  not 
to  be  thought  of.  Tables  of  the  nutritive  values  of  foods 
are  suggestive.  But  they  should  be  supplemented  by  tables 
of  tastiness.  The  inadequacy  of  the  present  schedules  and 
the  difficulties  of  the  problem  are  indicated  by  the  fact 
that  such  tables  assign  no  value  to  water.  Certainly  the 
proportion  of  water  must  have  a  good  deal  to  do  with  ease 
of  digestion  and  assimilation,  and  thus  with  the  nutriment 
utilized.  The  tables  in  fact  do  not  rise  to  the  plane  of  the 
complementary  conception,  and  their  theory  does  seem  to 
be  influenced  by  the  less  adequate  practice  of  imputation. 
The  water,  of  course,  may  be  obtained  in  some  other  form 
freely  and  practically  gratuitously,  while  the  "nutritive" 
elements  have  to  be  paid  for. 

Transputed  utility,  unlike  utility  proper,  is  always  and 
[  entirely  equaled  or  matched  by  economic  value.    It  is 
always  a  "least  possible"  or  grudging  utility,  that  is,  a 


TRANSPUTATION  OF  UTILITY  121 

\  marginal  utility.  This  is  only  another  way  of  saying  that  it 
\is  always  economic  value.]  It  may  as  far  exceed  the  actual 
contribution  to  enjoyment  made  by  the  object  which  pos- 
sesses the  transputed  utility  as  the  market  value  of  neces- 
saries may  exceed  their  contribution  to  satisfaction  when 
their  price  is  forced  up  under  untoward  conditions.  JTrans-j 
puted  utility  is  complementary  utility  that  has  become 
value.  But  transputation  is,  as  regards  the  particular  arti- 
cle favored,  transputation  of  value  first  and  of  utility  sec- 
ondarily. Imputed  utility  follows  in  the  wake  of  value, 
while  value  usually  follows  utility.! 

A  superabundant  good  first  acquires  value  by  reason  of 
its  becoming  scarce  relatively  to  the  demand  for  it.  Greater 
scarcity  means  greater  value,  still  with  reference  to  its 
foundation  in  utility  proper  to  the  good.  Then  if  it  is 
much  combined  with  other  goods,  and  if  its  supply  is 
smaller  than  the  supply  of  these  other  goods,  it  may  come 
to  have  an  accession  of  value  transputed  to  it  by  reason  of 
its  strategic  position  as  compared  with  its  complements. 
There  is  a  great  difference  between  the  effect  of  transputa- 
tion upon  the  course  of  the  value  of  a  particular  good,  and 
the  ordinary  effect  of  decreasing  the  supply.  In  the  latter 
case  the  curve  of  diminishing  utility  is  simply  retraced  up- 
wards, or  rather  uncovered,  and  its  form  remains  regular. 
Transputation,  however,  distorts  it  by  a  sudden  steepen- 
ing of  its  upper  portion  until  it  becomes  almost  vertical. 
Or,  if  transputed  value  is  destroyed  by  an  increase  of 
supply,  the  diminution  of  utility  is  very  abrupt  until  an 
equilibrium  with  the  supplies  of  other  needed  goods  is 
attained. 

The  distinction  between  transputed  value  or  utility  and 
a  high  degree  of  utility  and  value  not  due  to  transputation 
hinges  upon  the  difference  between  the  two  sorts  of  scarcity 
connected  with  the  two  cases.  Scarcity  in  some  sense  and 
in  varying  degree  is  the  basis  of  all  economic  value.  It  is 
scarcity  which  makes  goods  technically  "economic,"  as 


128     WELFARE  AS  AN  ECONOMIC  QUANTITY 

opposed  to  "free"  goods.  But  in  the  case  of  the  reversing 
of  simple  diminishing  utility  through  the  diminution  of  the 
supply,  the  scarcity  is  —  aside  from  the  relation  to  wants 
—  absolute.  It  would  ordinarily  be  expressed  by  indicating 
the  supply  of  the  goods  in  absolute  numbers  compared  with 
the  need  or  effective  demand,  the  latter  being  either  tacitly 
understood,  or  likewise  expressed  in  absolute  numbers. 
Scarcity  involving  transputation,  on  the  other  hand,  is 
relative,  even  apart  from  that  relation  to  human  wants 
which  is  the  essence  of  all  utility.  There  is  here  a  relation^ 
between  the  supply  of  the  good  whose  value  is  increased  by! 
transputation  and  the  supplies  of  the  other  goods  which  are 
its  complements.  This  relation  is  best  expressed  in  terms  of 
proportion.  It  is  this  relative,  or  doubly  relative,  scarcity 
resulting  in  transputation  that  gives,  or  rather  superadds, 
a  distinctive  characteristic  to  the  curve  of  diminishing  util- 
ity. As  already  stated,  it  steepens  the  curve  at  its  higher, 
portion  and  increases  the  apparent  area  of  super-marginal 
utility  wherever  its  influence  is  felt.  Its  influence  is  felt] 
wherever  supply  is,  relatively  to  the  supplies  of  associated  t 
goods,  scanty  or  decreasing  instead  of  abundant  or  in-  , 
creasing. 

Transputation  has  so  far  been  considered  mainly  from 
the  side  of  the  good  upon  whose  presence  the  completion  of 
the  group  is  dependent,  that  is,  with  reference  to  the  accre- 
tion of  a  surplus,  or  a  transputed,  utility  to  a  recipien^ 
good.  But  there  is  another  side  to  the  process.  /The  utili^i 
zation  of  a  particular  good  which  is  available  in  abundance^ 
and  whose  intrinsic  qualities  seem  to  entitle  it  to  high 
estimation  may  fail  because  necessary  complements  are 
unobtainable.  It  will  then  have  no  value.  Desert  soils  are 
frequently  of  great  natural  fertility,  but  they  are  not  val-  .- 
ued  until  a  well  or  other  source  of  water  is  available.  If 
the  needed  complements  are  obtained,  the  value  of  the 
group  is  imputed  to  them  —  transputed  we  should  say  if 
the  emphasis  were  on  immediate  utility — until  scarcity  or 


TRANSPUTATION  OF  UTILITY  123 

cost  gives  value  also  to  the  good  previously  superabund- 
ant. A  member  of  a  group  may  be  said  to  have  utility  trans- 
puted away  from  it  when  its  peculiar  fitness  for  this  group 
relation  is,  on  account  of  its  abundance,  unrecognized  or 
inadequately  recognized  in  terms  of  value.  Knowledge  of 
how  to  utilize  the  good  effectively  may,  in  a  broad  sense, 
be  the  wanting  complement. 

/  The  cheapening  or  improvement  of  other  goods  that  can 
/be  applied  to  uses  in  conjunction  with  the  commodity  in 
I  question  tends  to  increase  its  value,  that  is,  to  favor  trans- 
/  putation  of  utility  to  it.  Cotton  has  probably  no  less  mul- 
tifarious and  important  uses  than  rubber.  But,  in  their 
complementary  groupings,  value  is  largely  imputed  to 
rubber,  while  it  is  probably  imputed  away  from  cotton  be- 
cause of  the  relative  abundance  of  the  latter ,|  Many  things 
of  daily  use  have  their  value  enhanced  by  the  cheapness  of 
cotton,  while  the  use  of  other  things  is  hampered  by  the 
expensiveness  of  rubber,  hard  and  soft,  as  it  enters  into  the 
construction  of  mechanical  contrivances,  toilet  articles, 
etc.,  of  various  sorts.  Utility  is  transputed  away  from  salt, 
while  it  is  doubtless  transputed  to  some  of  the  rarer  fla- 
vors, for  example,  the  flower  essences  used  in  confection- 
ery. A  broader  view,  however,  emancipating  itself  from 
the  fetich  of  the  market-place,  will  recognize  the  great 
complementary  utility  of  salt  —  a  complementary  utility 
of  which  it  should  not  be  in  thought  dispossessed  merely 
because,  in  uses  of  which  the  average  man  has  no  direct 
experience,  its  marginal  utility  is  very  low. 

Because  of  the  possibilities  of  imputation  of  value  and 
transputation  of  utility  to  or  from  a  good  whose  utility  is 
chiefly  complementary,  more  than  usual  elasticity  of  supply 
is  necessary  to  maintain  an  approximately  steady  and  con- 
stant value  for  such  a  good.  This  fact  is  especially  interest- 
ing in  its  relation  to  the  value  of  the  agents  of  production, 
with  which,  however,  we  are  not  here  directly  concerned. 
Ease  of  substitution,  or  the  easy  finding  of  equivalents, 


124     WELFARE  AS  AN  ECONOMIC  QUANTITY 

amounts  to  tlie  same  thing  as  elasticity  of  supply.  The 
same  elasticity  which  keeps  the  value  of  a  merely  comple- 
mentary good  steady  tends  also  to  keep  it  low.  Since  there 
appears  to  be  no  reason  why  such  goods  should  in  general 
have  a  specially  elastic  supply  as  compared  with  other 
goods,  a  given  change  in  the  amount  of  the  demand  for  a 
merely  complementary  good  may  be  expected  to  produce 
a  greater  change  in  value  than  is  the  case  with  a  similar 
change  in  the  demand  for  a  complete  or  self-contained 
good.  A  good  of  the  first  description  may  gain  much  by  a 
comparatively  slight  relative  scarcity,  but  it  may  quickly 
lose  as  much  by  a  change  of  conditions  in  the  opposite 
direction. 

rf  The  value  of  complements,  in  so  far  as  it  is  involved  in 
( transputation,  will  thus  generally  be  rather  unstable.  High 
valuation  stimulates  substitution,  and  a  comparatively 
slight  impairment  of  the  monopoly  of  a  complement  may 
take  away  most  of  its  transputed  utility.  The  instability 
and  insecurity  of  the  value  of  a  complement  are  ordinarily 
proportionate  to  the  degree  in  which  its  utility  is  due  to 
transputation.  Only  in  exceptional  cases,  where  the  in- 
crease of  its  supply  is  peculiarly  difficult  and  where  its 
usefulness  is  so  fundamental  or  so  unique  as  to  place  it 
beyond  reach  of  competition  through  substitution,  will  a 
high  degree  of  transputed  utility  be  stable.  Secure  it  can 
\  ^carcely  ever  be  said  to  be. 

/  The  limitations  upon  imputation  and  transputation  — 
/  which  do  not  limit  complementary  utility  —  are  replace- 
ment and  substitution.  They  are  usually  very  effective. 
They  are,  however,  much  more  effective  for  a  narrow 
species  of  goods  than  for  broad  classes.  Necessaries  as  a 
class  are  quite  irreplaceable.] 


CHAPTER   XI 

THE  TRANSPUTED  CHARACTER  OF  THE  INITIAL  UTILITY 
OF   NECESSARIES 


TRANSPUTATION  is  especially  important  in  relation  to  the 
theory  of  the  utility  of  necessaries.  Necessaries,  it  is  said, 
being  the  means  of  preserving  life,  may,  under  conceivable 
circumstances,  have  a  value  equal  to  that  of  life  itself,  and 
therefore  infinitely  or  indefinitely  large.  On  the  side  of 
economic  valuation  it  is  perhaps  a  tenable  proposition  that 
necessaries  may  be  worth  the  full  value  of  life.  And  that  is 
indefinitely  large,  though  not  infinite.  Does  this  value, 
then,  always  suppose  utility,  and  a  utility  at  least  equal 
in  magnitude  to  that  of  the  value?  For  some  purposes  the 
answer  is  affirmative:  The  utility  of  necessaries  is  equal  to 
their  value. /But  even  without  such  warning  as  is  contained 
in  the  foregoing  discussion  of  transputed  utility,  one  must 
feel  that  the  utility  involved  is  not  quite  the  same  in  its 
nature  as  that  utility  which  is  the  source  of  man's  ordinary 
enjoyments.  Utility  is  ordinarily  and  rightly  thought  to  be 
proportionate  to  satisfaction.  The  supposedly  supreme 
degree  of  utility  of  necessaries  to  a  person  in  straits,  for  ex- 
ample, the  degree  of  utility  of  food  to  a  starving  man,  calls 
for  critical  examination.) 

As  a  matter  of  logic,  in  the  first  place,  it  is  not  true  that 
one  of  a  number  of  necessary  means  to  an  end  must  be 
valued  as  highly  as  the  end  itself,  though  something  like 
this  is  true  of  all  the  necessary  means  combined.  These  nec- 
essary means  are  complements  of  one  another.  If  alongside 
the  chief  means  any  of  the  other  factors  can  establish  a 
claim  to  consideration  and  to  value,  there  is  just  so  much 
less  left  to  be  attributed  or  imputed  to  that  which  is  felt  to 
be  the  great  precondition  to  the  end. 


126     WELFARE  AS  AN  ECONOMIC  QUANTITY 

It  is  not  sound  to  argue  that  because  without  life  one 
cannot  have  what  life  contains,  therefore  the  importance 
of  life  must  exceed  that  of  its  contents.  What  gives  this 
argument  speciousness  is  the  fact  that  life  is  worth  more 
than  any  one  of  the  elements  of  which  it  consists.  But  this 
proposition  is  true  only  on  the  assumption  that  there  re- 
main other  elements  that  are  worth  something.  Life  is  at 
most  worth  only  what  it  contains,  or,  strictly  speaking, 
something  less  than  what  it  contains,  since  the  process 
of  imputation  itself  costs  something.  Existence  in  the 
abstract  is  mere  potentiality.  It  is  empty  space,  or  rather 
empty  time.  It  is  merely  room  for  something  else.  Life 
is  abstract  opportunity,  but  its  value  depends  upon  what 

i  constitutes  its  concrete  offerings.  Not  mere  jifeJtselL_bul 
the  good  con/tenL^fJifea^Js,  what  is  desirable  jind  desired. 
Life  itself  has  no  value  except  as  means  to  an  end.|  The 
mere  means  to  life  are  therefore  still  more  remote  in  the 
chain  of  values  and  their  value  is  entirely  contingent. 

The  value  transputed  to  the  means  of  preserving  and 
sustaining  life,  that  is,  such  part  of  their  value  as  is  not  pro- 
portionate to  the  amount  of  satisfaction  directly  obtained 
from  such  goods,  is  subtracted  from  the  value  of  other 
things  that  life  can  give.  The  great  value  attributed  to  the 
necessaries  of  life  in  situations  of  extreme  exigency  is  trans- 
puted value  and  transputed  utility,  not  utility  proper.1  But 
of  course  transputed  utility  is  just  as  good  a  basis  for  mere 
economic  or  exchange  value  as  is  utility  proper.  Hence 
the  great  possibilities  of  a  rise  in  price  for  necessaries,  for 
example,  in  a  besieged  city.  But  from  the  point  of  view  of 
consumption  and  enjoyment,  the  situation  as  regards  the 
satisfaction  obtainable,  and  the  real  utility,  are  very  differ- 

f1  Cf.  Professor  Patten's  conception  of  "absolute"  utility  (Dynamic 
Economics,  p.  40),  which  is  parallel  to,  yet  curiously  different  from,  the 
idea  developed  here.  The  viewpoint  of  the  text  is  more  nearly  antici- 
pated by  Johnson,  Rent  in  Modern  Economic  Theory,  1902,  footnote 
on  pp.  12-13,  where  credit  is  also  given  to  Hobson,  Economics  of  Distri- 
bution. 


THE  INITIAL  UTILITY  OF  NECESSARIES     127 

ent.  Not  all  utility  can  logically  be  transputed  to  food, 
since  not  all  other  utilities  are  free,  or  without  economic 
value.  A  man  may  rationally  give  all  he  possesses  for  food 
to  save  his  life  because  of  what  the  future  means  to  him  in 
the  way  of  opportunity  to  create  and  enjoy  other  utilities. 
But  if  he  were  to  forego  all  future  utilities  for  the  sake  of 
barely  preserving  life,  he  would  not  be  acting  rationally 
and  economically,  though  he  might  be  impelled  to  such 
action  by  an  instinct  that  was  not  created  to  cope  with 
any  such  situation.  No  man  could  rationally  sell  himself 
into  unmitigated  and  hopeless  slavery.  J 

The  transputation  of  utility  to  necessaries  is  instinctive, 
and  the  effect  upon  feeling  of  the  means  of  preserving  life 
may  therefore  often  be  immediate  and  intense.  Instinc- 
tive appetite  may  cause  the  transputed  utility  of  necessaries 
to  be  experienced  as  a  very  great  immediate  utility.  But, 
though  the  process  of  transputation  is  instinctive,  the 
degree  of  value  attained  by  necessaries  under  unusual  cir- 
cumstances is  much  in  excess  even  of  a  possibly  enhanced 
immediate  utility  due  to  heightened  appetite.  Extreme 
exigency,  in  fact,  is  likely  to  impair  the  possibility  of  imme- 
diate enjoyment.  It  is  moderate  hunger  that  is  "the  best 
sauce."  (Moreover,  if  a  person's  circumstances  are  chroni- 
cally or  permanently  straitened,  the  borrowed  utility  also, 
that  is,  the  utility  instinctively  transputed  to  necessaries, 
is,  as  we  have  seen,  not  rationally  transputed.  The  direct 
individual  contribution  to  happiness  made  by  mere  nec- 
essaries may  be  negligible.  Their  utility  proper  may  be 
next  to  nothing./ 

The  relative  importance  of  different  portions  of  an  in- 
ividuaPs  income,  as  well  as  of  different  magnitudes  of  in- 
'come,  should  be  considered  in  the  light  of  the  principle  of 
the  transputation  of  utility  to  necessaries.  There  is  a  par- 
ticular portion  of  income  which  may  be  distinguished  as 
more  especially  devoted  to  utilities  proper.  This  is  the 
portion  just  above  what  is  required  for  necessaries,  a  stage 


128     WELFARE  AS  AN  ECONOMIC  QUANTITY 


• 


beyond  which  the  income  of  many  individuals  does  not 
reach.  We  may  call  this  free  or  super-minimal  income, 
either  of  which  terms  is  self-explanatory.  This  is  the  shift- 
able  or  disposable  portion  of  income  above  the  necessary 
provision  for  bare  subsistence.'.Luxury  in  certain  forms  is 
the  most  developed  phase  of  free  income  or  free  expendi- 
ture. But  the  demand  for  comforts  exhibits  more  clearly 
the  tendencies  of  ordinary  free  income,  unmixed,  on  the 
one  hand,  with  transputed  elements  of  utility,  and,  on  the 
other,  with  adventitious  elements.  The  character  of  the 
distinction  between  free  and  minimal  or  necessary  expen- 
diture is  also  suggested  by  the  division  of  wants  into  exis- 
tence wants  and  culture  wants,  with  the  implication  that 
the  latter  have  greater  intrinsic  significance.  \ 

Without  free  income  all  utility  tends  to  be  swallowed  up 
by  transputation  to  necessaries.  Hence  utility  proper  has 
little  scope  except  where  there  is  enough  income  to  include 
some  free  income.  For  this  reason  a  man  clings  obstinately, 
as  should  be  expected,  to  certain  "indulgences,"  even  at 
the  cost  of  not  obtaining  some  necessaries  and  of  thus  im- 
pairing health.  Man  seeks  ultimately  only  satisfaction,  or 
the  things  that  give  satisfaction.  He  does  not  want  mere 
U  liTeTfruTtne  ^6od"oQife.  A  man  will  of  ten  sacrifice  in  some 


Jegree  themeans  of  subsistence  to  mere  sources  of  excite- 
ment and  pleasure.]  The  whole  series  of  so-called  stimu- 
lants, from  tea,  coffee,  and  cocoa  to  malt  drinks,  wine,  and 
spirits,  in  their  various  forms,  belong  in  this  class  of  utili- 
ties. These  direct  nerve-stimulants  are  especially  subject 
to  abuse  by  the  very  poor,  who  usually  have  relatively 
small  resources,  mentally  as  well  as  economically,  for  the 
finding  and  utilization  of  more  durably  fruitful  methods  of 

,  applying  super-minimal  income. 

f*&  is  not  always  super-minimal  income  that  is  used  for 

"'  stimulants  and  excitants.  As  a  cynic  might  say,  a  man  can 
do  very  well  without  some  of  the  necessaries  of  life,  but 

'  he  has  "got  to  have"  a  few  luxuries.  \This  philosophy  is 


THE  INITIAL  UTILITY  OF  NECESSARIES     129 

neither  unknown  among  the  masses,  nor  unuttered.  For 
such  reasons  the  curve  of  demand  for  tobacco  and  that  for 
alcoholics  have  the  steepness  indicative  of  an  inelasticity 
which  some  economists  have  supposed  characterized  exclu- 
sively the  demand  for  necessaries.1  Cattle,  sheep,  and 
swine,  and  also  some  human  beings,  are  doubtless  in  their 
best  state  of  "mind"  when  living  a  merely  vegetative  ex- 
istence. If  they  have  enough  to  eat,  are  mildly  treated, 
and  are  induced  to  take  exercise  or  labor  hardly  more  than 
enough  to  keep  their  digestion  in  good  shape,  they  are 
doubtless  happy,  perhaps  almost  "as  happy  as  a  clam." 
But  they  are  not  living  a  human  life./  For  a  human  exist-) 
ence  and  for  human  welfare,  free  income 'is  more  impor-1 
tant,  though  not  more  fundamental,  than  the  necessaries 
of  life,  j.  One  cannot  build  a  house  without  first  laying 
foundations;  but  the  foundations  derive  all  their  irnpor- 
tajice  from  the  structure  raised  upon  them. 

The  gist  of  the  matter  is  that  transputed  utility  should 
not,  strictly  speaking,  be  called  utility.  In  case  of  the 
transputation  of  utility  to  necessaries,  it  is  measured,  not 
by  what  is  positively  contributed  to  consumption  or  enjoy- 
ment, but  by  negative  or  destructive  power  over  the  health 
and  life  which  are  the  foundation  of  all  enjoyment.  |  What 
is  the  true  utility  of  food  to  those  to  whom  it  merely  con- 
tinues an  existence  which  yields  nothing  but  privations? 
And  what  would  be  the  rate  of  diminution  of  real  utility, 
supposing  the  capacity  of  such  people  for  feeling  remained 
unimpaired,  if  they  were  given  first  enough  of  the  neces- 
saries, and  then  some  of  the  comforts  of  life?  /For  normally 
constituted  human  beings,  as  distinguished  from  such  as 
live  in  a  stage  of  brute  instinct  and  appetite,  no  diminution 
of  utility  results  from  an  increase  of  goods  which  provides^ 

1  Cournot,  in  Mathematical  Principles  of  the  Theory  of  Wealth  (transla- 
tion), p.  46,  definitely  associates  the  most  superfluous  and  the  most  nec- 
essary goods  as  regards  the  character  of  their  demand  curves.  But  he 
relates  the  former  to  ideas  of  adventitious  utility. 


130     WELFARE  AS  AN  ECONOMIC  QUANTITY 

comforts  where  before  were  merely  necessaries.  It  is  only 
free  income  that  affords  any  considerable  means  of  enjoy- 
ment. In  other  words,  it  is  only  free  income  that  has  real 
utility.) 


CHAPTER   XII 

CONTRASTED   SIGNIFICANCE   OF   MERELY   COMPLE- 
MENTARY  UTILITY   AND   TRANSPUTED   UTILITY 

So  far  we  have  not  made  an  issue  of  the  relation  between 
complementary  utility  and  transputed  utility.  The  differ- 
ence between  their  relations  to  welfare  has  only  been  inci- 
dentally suggested.  It  may  seem  that  complementary  utility 
is  of  importance  only  when  transputed.  But  it  is  only  for 
the  market  that  this  is  true.  In  the  larger  view,  and  in 
the  field  of  consumption,  there  is  a  striking  contrast  be- 
tween merely  complementary  utility  and  transputed  utility. 

/xln  merely  complementary  utility  the  peculiar  group 
utility  is  vaguely,  if  at  all,  apportioned,  or  apportioned 
without  discrimination,  among  the  members  of  the  group. 
Transputed  utility,  on  the  other  hand,  is  definitely  and 
forcibly  assigned  to  particular  members  as  economic  value. 
[y  on  such  terms  is  the  article  that  is  favored  by  trans- 

/  putation  to  be  obtained.  I  In  order  that  all  complementary 
lity  might  be  transputed  and  become  value  as  well  as 
utility,  while  remaining  evenly  apportioned  throughout 
the  group,  it  would  be  necessary  that  each  and  all  of  the 
supplies  of  the  different  members  of  a  group  should  be  so 
adjusted  that  the  marginal  utility  of  each  member  would 
absorb  the  complementary  utility  in  proportion  to  its  part 
in  the  group.  The  supplies  must  be  neither  too  great  nor 
too  small  to  meet  these  requirements,  and  this  adjust- 
ment must  be  stable.  The  coincident  and  enduring  realiza- 
tion of  all  these  conditions  is  inconceivable.  Hence  the 
complementary  utility  may  be  assumed  to  be  always  in 
excess  of  the  transputed  utility  based  upon  a  particular 
group  relation.  In  other  words,  not  all  complementary 
utility  can  be  transputed  or  imputed  as  commercial  value.- 


132     WELFABE  AS  AN  ECONOMIC  QUANTITY 

Merely  complementary  utility  has  little  relation  to  the 
market,  although  it  has  much  importance  in  a  well-man- 
aged private  economy,  f  The  marginal  utility  or  value  of  an 
important  article  of  food  is  likely  to  be  determined  chiefly 
by  some  relatively  unimportant  noncomplementary  use, 
as  for  example  in  the  case  of  salt.  /The  utility  of  a  pinch  of 
salt,  though  it  is  not  wanted  by  itself,  is  out  of  all  pro- 
portion to  its  cost.j  Bread,  also,  because  of  its  complement- 
ary utility,  contributes  much  more  to  enjoyment  than,  in 
proportion,  to  its  commercial  .value.  Potatoes  alone,  at 
least  the  typical  ripe,  mealy,  and  rather  tasteless  kind, 
would  be  very  unsatisfactory  food,  yet  for  many  no  im- 
portant meal  is  quite  complete  without  them.  But  their 
commercial  value  is  proportioned  rather  to  their  particular 
(marginal)  than  to  their  complementary  utility.  JThe  en- 
joyment obtained  by  well-chosen  combinations  of  such 
articles  is  therefore  in  general  "clear  gain."  The  complex 
mentary  utility  is  super-marginal. 

/Complementary  relations  are  flexible  and  adjustable. 
The)  elasticity  of  demand  is  largely  due  to  this  fact.  This 
Jexibility  of  complementary  relations  is  the  great  means  of 
preventing  the  imputation  or  transputation  of  the  result- 
ing utility  and  the  making  of  it  marginal.^)  If  the  quanti- 
tative relations  within  the  group  can  be  adjusted  to  the 
conditions  of  supply,  or  if  new  components  may  be  intro- 
duced —  supposing  either  alternative  costs  less  sacrifice  of 
super-marginal  utility  than  results  from  transputing  it  as 
economic  value  to  the  relatively  scarce  articles  —  such  an 
alternative  to  transputation  will  be  adopted,  at  least  in  so 
far  as  habit  and  inertia  can  be  overcome  by  intelligence. 
Thus  the  super-marginal  character  of  complementary 
utility  will  be  in  large  degree  preserved.  Some  slight  super- 
marginal utility  is  sacrificed  —  through  the  less  perfect 
fitness  of  the  substitute  —  in  order  to  prevent  a  greater 
sacrifice  by  way  of  transputation. 

On  account  of  the  flexibility  of  the  complementary  re- 


TEANSPUTED  AND  COMPLEMENTARY  UTILITY   133 

lation,  the  measurement  of  the  utility  of  a  complement  by 
means  of  relative  replaceability,  or  by  the  loss  incurred  in 
going  without  it,  is  appropriate  only  in  the  field  of  produc- 
tion, where  imputed  value  is  the  significant  phase  of  the 
complementary  relation.  The  limit  of  the  commercial 
value  of  a  complement  is  the  difference  between  the  value 
of  the  complete  group  and  its  value  without  the  particular 
complement.  The  value  of  the  group  less  the  complement 
in  question  will  depend  upon  the  cost  of  a  substitute,  both 
in  direct  outlay  and  in  inferior  suitability.  But  these  are^ 
all  matters  of  marginal  utility  and  market  value.  J  Utility, 
however,  is  more  than  marginal  utility;  and  especially 
complementary  utility  is  more  than  economic  value,  or 
rather  quite  different  from  it,  tending  even  to  escape  com- 
mercial reckoning  altogether.  Complementary  utility  is 
proportional  to  contribution  to  satisfaction  over  and  above 
the  contribution  of  particular  utility.  Complementary 
utility  thus  depends  upon  suitableness  only  and  not  upon 
indispensableness.  Replacement  and  substitution  do  not 
merely  check  transputation,  they  defeat  commercial  meas- 
urement of  complementary  utility.^ 

The  view  that  super-marginal  utility  does  not  affect  and 
is  not  affected  by  marginal  or  market  utility  is  subject  to 
qualification.  The  amount  of  complementary  utility,  it  is 
true,  has  no  relation  to  the  marginal  utility  of  the  goods 
involved,  except  in  the  case  of  the  commercial  grouping  and 
sale  of  the  complete  good  —  which  is  more  conceivable 
than  practicable  —  and,  for  the  rest,  only  in  so  far  as  the 
complementary  utility  becomes  in  part  marginal  utility 
by  transputation.  But,  at  least  from  a  dynamic  point  of 
view,  the  amount  of  complementary  super-marginal  utility 
does  affect  indirectly  the  amount  of  goods  demanded  and 
hence  their  marginal  utility. 

As  it  is  true  that  in  general  the  economic  rent  of  land 
|oes  not  produce  high  prices  for  raw  produce  but  is  the 
lect  of  high  prices,  so  a  large  amount  of  super-marginal 


134     WELFARE  AS  AN  ECONOMIC  QUANTITY 

j  utility  is  in  general  an  effect  of  the  lower  prices  of  articles 
'  of  consumption.  [But  in  the  case  of  land,  its  use  for  house 
1  plots  and  lawns  inakes  it  less  possible  to  use  it  for  the  rais- 
ing of  wheat,  hence  the  rent  of  wheat  lands  must  be  higher 
than  it  would  be  if  wheat  did  not  have  to  compete  with 
other  uses  for  the  land.  In  order  that  the  area  of  wheat 
land  may  be  large  enough,  other  and  presumably  some- 
what inferior  acreage  must  be  resorted  to,  whereas,  if  land 
were  used  for  wheat  cultivation  only,  the  area  actually 
devoted  to  homes  might  have  served  the  purpose  better. 
The  high  degree  of  utility  of  land  for  the  latter  purpose, 
therefore,  does  affect  the  demand  for  land.  Since  degree 
of  utility  and  extent  of  demand  go  together,  the  greater 
the  excess  of  this  utility  above  that  of  wheat  growing,  the 
more  land  a  given  use  will  take  away  from  the  wheat 
fields.  Thus  a  different  and  higher  marginal  utility  will 
be  established  because  of  the  intense  use. 
/  Similarly,  the  kinds  of  utility  of  higher  degree  are  an 
(important  factor  in  demand.  If  all  uses  are  assumed  to  be 
constant  and  unchanging  —  as  they  may  be  for  the  pur- 
poses of  an  illustration  requiring  static  conditions  of  de- 
mand —  only  actual  uses  of  land  near  the  margin  need  be, 
considered.  /The  influence  of  uses  of  higher  degree  is  in  a 
sense  a  phase  of  the  dynamics  of  demand.  But  it  is  per- 
haps just  in  these  regions  of  high  utility  that  new  develop- 
ments are  most  likely.  The  leadership  of  consumption 
lies  with  those  having  much  free  income  who  are  thus  able 
to  experiment  with  new  combinations  of  goods.  Subjec- 
tive conditions  favoring  the  development  of  complemen- 
tary utilities  in  consumption  cause  an  increased  demand  for' 
the  articles  which  permit  this  exploitation  and  thus  tendi 
to  increase  their  economic  value.  Perhaps  a  strictly  static! 
view  would  not  need  to  take  account  of  this  effect,  but  \ 
in  fact  the  complementary  relation  is  in  its  very  nature 
flexible,  variable,  and  dynamic.  Complementary  utility 
and  super-marginal  utility  are  shifting  quantities.  Their 


TRANSPUTED  AND  COMPLEMENTARY  UTILITY  135 

amount  and  its  fluctuation  must  affect  the  amount  of 
demand.  Complementary  utility  therefore  indirectly 
?ects  value  or  marginal  utility. 

It  is  a  defect  in  the  exposition  of  the  marginal-utility 
eory  of  value  that  it  fails  to  notice  that  the  determining 

ffect  of  the  marginal  increments  of  consumption,  which 
are  relatively  poor  in  utility,  is  what  it  is  because  the  rest 
oFthe Ijtggiply  and  demand  are  what  they  are,  and  that  the 
demand  would  not  reach  the  amount  assumed  without  the 
more  fruitful  as  well  as  the  marginal  uses.  The  more  im- 
portant uses  are  assumed  to  be  fixed  and  certain  and  the 
marginal  to  be  variable  and  doubtful,  and  of  course  the  vari- 
able uses  are  the  critical  point.  Likewise  it  is  the  common 
man's  assumption  that  price  is  fixed  in  the  large  markets, 
or  by  large  dealers,  and  merely  echoed  by  the  small.  In 
fact,  the  large  transactions  are  of  decisive  importance  only 
in  proportion  to  their  size,  and  they  indicate  the  normal 
price  better  only  because  of  their  greater  sensitiveness  to 
changes  in  supply.]  Similarly  the  margin  of  utility  is  wherd 
it  is  because  of  the  amount  of  the  entire  utility  and 
volume  of  the  entire  demand.)  Marginal  utility  is  therefor 
in  part  determined,  though  indirectly,  by  the  need  for  the; 
goods  in  groups  and  uses  that  are  certain  of  their  effect 
just  because  highly  productive  of  super-marginal  utility 
Most  of  the  uses  to  which  important  articles  of  consump- 
tion are  put,  especially  the  more  durable  articles,  have  con- 
siderable super-marginal  utility.  In  perhaps  the  majority 
of  private  economies  in  which  such  articles  are  used,  a  sole, 
and  therefore  a  marginal,  unit  will  yield  a  utility  much 
above  the  merely  marginal  utility.!  But  the  demand  for 
such  articles  is  the  most  sure  of  all.  At  the  same  time  the 
Delation  of  their  utility  to  value,  as  degree  of  market  value 

>r  marginal  utility,  is  somewhat  remote.    As  regards  an 

Tticle  of  this  nature,  such  reference  to  marginal  utility  as 
y  enter  the  mind  of  the  consumer  will  serve  chiefly  the 

urpose  of  aiding  him  to  form  a  notion  of  the  amount  of 


136     WELFABE  AS  AN  ECONOMIC  QUANTITY 

super-marginal  utility  or  consumer's  rent  he  is  to  receive. 
If  there  are  several  units  of  the  same  supply  definitely 
needed  within  a  particular  private  economy,ieven  the  last 
to  be  obtained  may  have  appreciably  more  man  marginal 
utility.  The  surplus  or  super-marginal  utility,  which  is 
likely  to  consist  of  complementary  utility,  will  be  a  factor 
in  determining  the  purchase.  If  fixity  of  degree  of  utility 
for  each  use  could  be  granted  as  a  postulate  of  the  theory 
of  diminishing  utility  and  marginal  utility,  the  application 
of  quasi-mathematical  conceptions  of  marginal  utility  and 
value  would  be  less  obstructed  by  complementary  utility 
and  super-marginal  utility,  which  are  admittedly  contin- 
gent. Actually  there  is  often  much  leeway,  though  variable 
in  amount,  between  marginal  enjoyment  and  reasonably  ex- 
pected enjoyment  or  utility.  So  far  from  being  the  rule,  it 
is  rather  an  unusual  coincidence  when  the  utility  of  an 
article,  to  its  owner  conforms  to  that  of  the  price  paid 
for  it. ! 

Complementary  utility  is  either  transputed  to  a  few 
articles  as  economic  value,  or  else  it  is  super-marginal.  Its 
tendency  in  the  field  of  consumption  is  to  avoid  transputa- 
tion.  Consumption  groupings,  too,  are  varied  and  elastic, 
and  the  possibilities  of  substitution  are  correspondingly 
greater  for  a  missing  group  member  than  for  an  isolated 
unit  of  supply.  When  there  is  no  necessity  for  transputa- 
tion,  the  utility  resulting  from  exploitation  of  commodities 
in  groups  is  one  of  the  greatest  sources  of  super-marginal 
utility  or  "consumer's  rent."  Grouping  as  pursued  con- 
sciously and  in  the  concrete  is  mainly  a  free  activity,  and 
the  psychical  income  thus  obtained  is  not  subject  to  a  mar- 

Iket  countercharge.  |  Nor  is  it  usually  shunted  from  the 
*roup  as  a  whole  to  some  one  or  few  members.  The  com- 
plementary relation  always  implies  potentiality  of  transpu- 
tation,  but  is  more  significant  for  happiness,  though  less 
significant  for  exchange,  when  transputation  is  unnecessary 
and  unthought  of.  Transputation,  or  rather  imputation  — 


TRANSPUTED  AND  COMPLEMENTARY  UTILITY  137 

since  nobody  is  interested  in  indirect  goods  except  as 
means  and  without  distinction  of  ultimate  uses  —  is  the 
rule  in  production,  or  at  any  rate  the  significant  situation. 
The  opposite  is  true  in  consumption.  Here  complementary 
utility  not  only  tends  to  escape  transputation,  but  is  in- 
trinsically of  greater  significance  when  it  is  unimputed,  or 
ipt  directly  reflected  in  market  value.1 1 
I  It  may  be  alleged  that  complementary  utility  is  just  as 
nuch  subject  to  marginal  judgment  and  valuation  as  the 
utility  of  any  congeries  of  goods,]  for,  though  the  comple- 
ment is  a  member  of  a  group  instead  of  a  unit  of  a  homo- 
geneous supply,  it  may  be  said  that  the  group  is  itself  a 
unit  of  a  supply  of  such  groups  which  will  be  increased  in 
/  number  up  to  the  marginal  point,  and  then  each  group 
will  be  valued  only  as  the  marginal  one  is  valued.  This 
would  all  be  very  true  for  economic  value  provided  the 
premises  of  the  argument  held,  and  doubtless  some  per- 
sons are  not  able  to  separate  their  judgment  of  utility 
from  their  judgment  of  value  (in  the  narrower  economic 
sense)  without  the  aid  of  such  circumstances  as  turn  utility 
into  value.  But  the  premises  do  not  hold,  and  the  separa- 
tion of  the  judgment  of  utility  from  that  of  economic  value 
is  specially  facilitated  in  the  case  of  complementary  utility. 
Where  the  usual  if  not  the  typical  situation  is  that  of  a 
consumer  needing  but  one  unit  of  one  kind  of  good,  and 
not  a  supply  in  the  sense  that  implies  plurality,  he  may 
very  well  find  a  striking  disproportion  between  the  utility 
of  the  good  to  him  and  the  price,  or  the  utility  of  the  price, 
he  pays  for  it.  An  amateur  musician's  piano  or  a  boy's 
fishing  tackle  have  degrees  of  utility  which  their  respec- 
live  prices  seldom  even  faintly  express.  It  is  particularly 
1  a  complement,  and  the  large  group  to  which  it  belongs, 

1  Professor  Patten,  though  without  reference  in  this  connection  to 

I   complementary  utility,  emphasizes  the  importance  of   keeping  a  large 

/    part  of  utility  super-marginal  through  competitive  substitution  of  one 

good  for  another  in  consumption  to  take  advantage  of  differences  in  price. 

/     See  Theory  of  Prosperity,  1902,  especially  pp.  61  and  82. 


138     WELFARE  AS  AN  ECONOMIC  QUANTITY 

that  is  likely  to  be  wanted  but  once.  The  group  will  not 
bear  repetition.  It  often  bulks  so  large  that  one  group  is 
enough  for  the  particular  economy.  Its  utility  may  be  any- 
where above  the  margin.  Here  marginal  utility  is  not 
nearly  so  important  as  utility,  especially  complementary 
utility.  Neither  household  furniture,  nor  clothing,  nor 
even  food  when  considered  in  relation  to  immediate  need, 
are  to  the  consumer  a  homogeneous  supply.  Each  is  a  re- 
lated group  of  unlike  goods.  Moreover,  each  article  of  a 
group  is  for  the  most  part  unique  in  the  economy  of  the  in- 
dividual consumer,  and  that  too  by  preference.  The  util- 
ity of  such  a  unique  good  can  have  any  sort  of  relation 
to  marginal  utility,  and  the  difference  between  marginal 
and  entire  utility  will  be  clear.;  It  is  a  monstrous  mistake 
to  suppose  that  marginal  utility  is  the  only  utility.  Indeed 
|  it  is  often  necessary,  tacitly  or  explicitly,  to  consider  the 
needs  of  society  at  large  in  order  to  give  the  homogeneous 
supply  and  the  marginal  principle  the  chance  they  deserve 
to  have. 

In  the  case  of  food  and  of  economically  perishable  goods, 
the  situation  is  not  quite  the  same  as  for  durable  goods, 
which  may  be  called  the  "fixed  capital"  of  consumption. 
There  is  a  flux  and  recurrence  of  processive  need  which 
must  be  met  by  a  flow  of  goods,  and  thus  the  unit  that  fully 
meets  the  need  of  to-day,  so  that  no  second  unit  is  now 
required,  will  disappear  and  make  room  for  a  unit  of  the 
same  sort  to-morrow  to  meet  the  recurrence  of  the  same 
need.  Every  careful  student  of  economics  appreciates  how 
unsatisfactorily  the  ordinary  conception  of  a  supply  of 
goods  —  that  is,  a  given  number  or  a  number  varying  with 
the  price  per  unit  —  works  out  in  connection  with  such 
utilities  in  illustrating  diminishing  utility  and  marginal 
utility.  But  we  can  apply  the  conception  of  diminution  of 
utility  to  the  volume  of  a  flow  as  well  as  to  the  amount  of  a 
fund.  A  supply  of  one  a  day,  whether  units  can  be  held 
over  from  previous  days  or  not,  would,  supposing  the  need 


TRANSPUTED  AND  COMPLEMENTARY  UTILITY  139 

is  also  for  one  a  day,  afford  only  the  unique  good  whose 
utility  may  be  expected  to  be  greater  than  marginal. 
/  Some  utilities  do  not  merely  tend  to  escape  imputation 
land  transputation;  they  are  unimputable.  Nobody  can 
f  confine  and  market  a  beautiful  natural  environment,  a 
blue  sky,  or  a  view  of  sea  or  mountain,  JThe  value  of  forest- 
clad  hills  as  a  regulator  of  drainage  and  climatic  conditions 
cannot  be  imputed  to  this  or  that  tree  or  wood-lot  and  be 
bought  or  sold  with  it.  ISuch  things  will  not  bear  dissection 
and  sale  piecemeal.  They  are  none  the  less  economically, 
though  not  commercially,  valuable^  They  are  valuable  to 
the  community,  though  they  are  nobody's  individual 
asset.  They  contribute  to  the  value  of  land,  but  their  con- 
tribution cannot  be  separately  appropriated  or  individ- 
ually administered.  Perhaps  commercial  honesty  and  the 
cleanliness  and  orderliness  of  a  people  are  values  in  the 
same  category,  but  they  are  not  so  clearly  economic  goods 
as  is  the  forest. 

r  It  is  perhaps  because  of  the  generally  free  and  unimputedi 
character  of  group  utility  in  consumption  that  it  has  re:! 
Jceived  little  or  no  attention  from  economists.1  I  Unlessf 
-necessaries  are  encroached  upon,  consumption  may  largely 
avoid  imputation,  which  makes  economic  value  out  o: 
complementary  utility,  and  transputation,  which  involves 
this  and  also  the  disproportionate  distribution  of  botl 
the  complementary  utility  and  the  corresponding  value 
Though  merely  complementary  utility  and  transputed  util- 
ity are  cognate  conceptions,  their  phenomena  being  results 
of  the  same  general  situation,  one  is  the  bright  side  and  the 
other  the  darker  side  of  consumption.}  It  is  too  often  for-\ 
gotten  that  economic  value  itself  is,  from  the  social  point  of 
view,  not  a  thing  to  be  desired,  but  it  is  rather  a  measure  I 
of  the  power  of  environment  over  man./'  Perhaps  for  the 
individual  also  the  possession  of  things  having  much  eco- 

f1  With  the  conspicuous  exception  of  Professor  Patten,  Consumption  of 
Wealth  (1889),  and  Theory  of  Dynamic  Economics  (1892). 


140     WELFARE  AS  AN  ECONOMIC  QUANTITY 

nomic  value  is  a  measure  of  his  power  over  his  fellows. 
When  both  terms  of  this  relation  are  duly  considered,  the 
sum  is  seen  to  be  zero.;  Transputed  utility  is  like  all  valu0 
in  being  a  measure  of  ithe  power  of  circumstances  and  oi 
commercial  strategy.  Utility,  on  the  other  hand,  is  directlyj 
worthy  of  desire,  and  complementary  utility  is  the  species; 
of  utility  the  least  likely  to  be  subjected  to  a  deduction  f or| 
costs,  and  therefore  the  most  largely  net.  In  other  words,) 

it  is  the  most  likely  to  be  super-marginalj 

] 


CHAPTER   XIII 

THE  NATUKE  OF  ADVENTITIOUS  UTILITY 

ADVENTITIOUS  utility  has  been  defined  as  that  part  of  the 
utility  of  a  good  which  is  attributed  to  it  on  account  of  the 
distinction  that  its  consumption  or  enjoyment  is  felt  to 
confer  on  the  possessor  or  consumer  by  comparison  with 
others  apparently  or  constructively  not  equally  well  able 
\  toj>ay. 

T  In  discussing  adventitious  utility  we  are  obviously  deal- 
ing with  something  very  closely  related  to  luxury.  Both  are 
/phenomena  of  large  expenditure  or  of  unusual  ability  to  pay, 
(and  so  of  large  income.  The  man  with  little  to  spend  de- 
votes most  of  it  to  articles  having  utility  proper  or  those 
having  necessarily  transputed  utility.  Whether  luxury  is 
morally  justifiable  or  not  we  cannot  say,  because  we  do 
not  know  what  is  meant  by  luxury,  and  perhaps  could  not 
arrive  at  an  acceptable  definition  if  we  tried.  By  some 
it  is  said  to  refer  to  whatever  is  relatively  expensive  as 
compared  with  what  habit  and  custom  have  made  familiar 
to  the  person  employing  the  term  or  applying  the  epithet.1 
Others  distinguish  some  more  specific  element, 

We  shall  not  attempt  to  discuss  the  relation  between 
adventitious  utility  and  luxury.  Perhaps  luxury  is  merely 
the  refinement  of  consumption.  Perhaps  it  is  indulgence 

1  The  relativity  theory  is  best  represented  by  Roscher,  Grundlagen  der 
Nationalokonomie,  book  v,  chap,  n,  23d  ed.,  p.  662.  He  emphasizes  stage 
of  civilization  and  degree  of  complexity  of  life  as  controlling  the  idea. 
By  way  of  illustration  he  quotes  an  English  writer  of  the  sixteenth  cen- 
tury who  complained  that  men  were  building  their  houses  of  oak  in 
place  of  willow;  while  formerly  houses  were  of  willow  but  the  men  were 
of  oak.  The  full  development  of  Roscher's  view  is  contained  in  his  essay, 
"  Ueber  den  Luxus,"  in  Ansichten  der  Volkswrtschaft  aus  dem  geschicht- 
lichen  Standpunkte,  3.  Aufl.,  1878. 


142     WELFARE  AS  AN  ECONOMIC  QUANTITY 

in  the  gratifications  of  adventitious  utility.  As  actually 
used,  the  word  more  likely  means  both,  and  besides  refers 
to  various  other  aspects  of  expenditure.  This  confusion  is 
readily  explained.  From  the  consumption  or  enjoyment  of 
rare  and  costly  articles  strictly  on  account  of  their  utility 
proper  as  developed  by  the  refinement  of  consumption,  it 
is  all  too  easy  to  pass  to  the  consumption  or  enjoyment  of 
the  very  same  articles  merely  or  chiefly  because  of  their 
costliness,  and  because  of  the  impression  upon  others  made 
by  their  possession  and  use.  Transference  of  feeling  in  the 
individual  and  imitation  of  externals  in  society  at  large 
are  continually  bridging  this  gap  and  obscuring  the  divid- 
ing^ line. 

Adventitious  utility  is  a  product  of  social  relations  and 
of  feelings  of  invidiousness  and  emulation.  It  is  not  the 
result  of  the  intrinsic  qualities  of  a  good.  Nor  is  it  directly 
the  result  of  the  conditions  of  supply,  though  it  has 
for  its  basis  rarity  and  correspondingly  high  marginal 
utility.  Adventitious  utility  is  not,  like  utility  proper, 
limited  in  amount  by  the  intrinsic  qualities  of  the  good. 
Transputation,  moreover,  does  not  account  for  the  acces- 
sion of  utility  received  by  an  object  that  has  become  a 
means  of  distinction  and  of  ostentation,  although  adven- 
titious utility,  like  transputed  utility,  is  superposed  upon 
utility  proper.  Adventitious  utility  is  a  species  by  itself. 
But  like  transputed  utility,  it  is  always  marginal,  never 
super-marginal.  This  follows  frpm  the  fact  that  it  is  a  re- 
sult of  economic  value  or  price.) 

Since  the  adventitious  utilities  are  not  present  in  the 
iper-marginal  utilities  of  the  different  units,  thus  requir- 
ing only  decreased  supply  to  reveal  their  amount,  there  is 
no  form  of  curve  appropriate  to  adventitious  utility  which 
may  be  discovered  by  changes  in  price.  Adventitious 
utility  is  itself  first  created  in  due  time  as  a  result  of  in- 
creased or  high  price.  The  higher  degree  of  marginal  utility 
proper,  unlike  a  similar  degree  of  adventitious  utility,  is  the 


THE  NATURE  OF  ADVENTITIOUS  UTILITY    143 

utility,  previously  in  part  super-marginal,  of  a  unit  put  to 

i  a  higher  order  of  use  than  that  formerly  at  the  margin. 

!  The  higher  marginal  utility  is  newly  revealed  to  the  market 

by  the  conditions  of  supply,  but  the  utility  itself,  so  far  as 

it  is  utility  proper,  is  in  no  sense  so  created.   But  in  the 

case  of  adventitious  utility,  its  very  existence  is  dependent 

upon  price  or,  strictly  speaking,  upon  high  price.   A  free 

^good,  or  an  abundant  good,  cannot  possess  it. 

The  consumption  or  enjoyment  of  adventitious  utility 
need  not  consciously  be  accompanied  by  social  reference. 
The  distinction  valued  may  be  transferred  from  social 
relations  to  the  qualities  of  the  object  and  the  utility  be 
thought  of  as  inhering  in  it.  It  is  with  reference  to  the  socio- 
psychical  origin  and  development  of  this  utility  that  the 
criterion  of  its  adventitiousness  is  to  be  applied.  The  indi- 
vidual thinks  he  values  for  itself  the  thing  possessing  ad- 
ventitious utility,  but  he  really  values  such  an  article  as 
highly  as  he  does  only  because  of  insidious  associations  and 
suggestions.  Thus,  although  the  consumption  of  articles 
for  the  sake  of  adventitious  utility  is  objectively  and  so- 
cially uneconomical  and  even  immoral,  it  is  not  subjec- 
tively so,  and  it  justifies  no  inference  as  to  the  morality 
of  the  individual.  Either  by  transference  of  feeling  within 
the  consumer,  or  because  of  incomplete  subjective  imita- 
tion of  its  originator,  adventitious  utility  becomes  psychi- 
cally an  immediate  utility.  But  it  is  only  superficially  so 
and  is  destroyed  by  analysis. 

Adventitious  utility  is  a  product  of  a  sort  of  psychical 
parasitism.  The  fundamental  processes  of  its  evolution 
are  affective  suggestion  and  transference  of  feeling.  In 
general,  of  course,  transference  of  feeling  is  adaptive  in 
character  and  of  survival  value.  But  the  principle  is  also 
operative  when  the  results  are  at  best  indifferent,  which  is 
the  case  with  adventitious  utility.  It  is  its  character  as  a 
by-product  which  makes  appropriate  the  name  "  adventi- 
tious." The  small  feet  of  Chinese  women  are  such  an 


144     WELFARE  AS  AN  ECONOMIC  QUANTITY 

adventitious  by-product  of  civilization.  Dress  and  personal 
decoration  have  been  thoroughly  permeated  with  the  same 
element  from  the  beginnings  of  tatooing  down. 

In  the  value  of  the  diamond  is  to  be  seen  perhaps  the 
best  example  of  adventitious  utility.  The  profitableness  of 
the  policy  of  the  great  diamond  monopoly  in  strictly  limit- 
ing output  is  a  result  of  the  ordinary  effect  upon  prices,  not 
of  mere  limitation  of  supply,  but  of  adventitious  utility 
maintained  by  this  policy.  The  great  increase  in  the  supply 
of  diamonds  since  the  opening  of  the  South  African  mines 
has  been  accompanied  by  a  marked  increase  in  their  value. 
The  expectation  of  a  decline  in  their  price  was  disappointed 
only  because  of  the  fact  that  their  utility  is  so  largely 
adventitious.  Even  so  the  marked  increase  in  supply 
accompanied  by  an  equally  marked  increase  in  economic 
value  has  been  possible  only  because  of  a  general  increase 
of  free  income,  especially  in  America,  which  absorbs  most 
of  the  world's  production.  The  intelligence  or  the  good 
sense  of  the  people  with  increasing  free  income  has  not 
increased  in  proportion  to  their  income,  although  this 
proposition  needs  to  be  qualified  somewhat  with  reference 
to  the  serviceableness  of  the  diamond  as  a  consumption 
reserve.  Even  so  there  are  much  more  economical  modes 
of  keeping  such  a  reserve. 

The  love  of  distinction  is  the  subjective  counterpart  and 
basis  of  adventitious  utility.  The  love  of  distinction  may 
be  a  purely  closet  emotion.  The  judgment  of  one's  self  may 
be  sufficient.  But  it  is  more  likely  that  self-esteem  will  try 
to  find  support  in  the  esteem  of  others.  Even  the  sense  of 
honor,  though  it  may  be  desocialized,  is  usually  a  very 
social  sentiment.  A  fortiori  the  feeling  of  economic  dis- 
tinction will  usually  express  itself  outwardly  and  socially, 
and  its  means  of  expression  will  be  more  or  less  grossly 
material.  Particularly  where  wealth  is  the  main  road  to 
distinction,  adventitious  utility  flourishes.  It  becomes 
sheer  expense  for  expense's  sake. 


THE  NATURE  OF  ADVENTITIOUS  UTILITY    145 

I  The  quantitative  judgments  of  the  human  mind  are 
/essentially  relative  and  comparative.  Weber's  Law  is  a 
jphase  of  this  fundamental  fact.  Only  through  the  adoption 
•of  physical  means  of  measurement  do  quantitative  judg- 
Ijnents  come  to  have  the  appearance  of  absoluteness.  Hence 
a  man  is  naturally  inclined  to  estimate  his  own  worth  by 
comparison  with  others.  (Much  depends  upon  the  character 
of  the  individual  whether  this  procedure  is  used  more  as  an 
excuse  for  defects  or  as  a  spur  to  ambition.  But  even  the 
most  rational  and  philosophically  minded  person  never 
quite  frees  himself  from  this  sort  of  thing  and  thus  comes 
to  value  himself  according  to  intrinsic  qualities.  Indeed, 
this  tendency  of  the  human  mind  is  not  merely  a  result  of 
general  adaptation,  but  it  has  a  special  fitness  for  the  pur- 
poses of  social  organization  and  the  division  of  labor.  No 
men  are  perfect  nor  can  they  become  so,  hence  all  that 
social  economy  can  do  is  merely  to  fit  the  best  available 
man  into  the  most  appropriate  place.  That  which  is  nec- 
essarily imperfect,  or  good  only  in  one  or  few  ways,  as  is 
usually  the  case  with  human  nature  in  the  concrete,  must 
be  judged  relatively.  Whether  a  man  is  good  for  much  or 
"good  for  nothing  "  depends  upon  what  kind  of  man  is 
needed  for  some  specific  purpose  and  upon  the  facility  of 
supplying  the  demand.  The  practical  importance  of  the 
man  will  have  little  to  do  with  his  excellences  or  defects  of 
temperament  and  disposition  as  measured  by  general  and 
absolute  standards.  The  man  himself  will  disregard  the 
qualification  and  attribute  enhanced  importance  to  his  own 
positive  qualities.  The  practical  judgment  of  magnitude  is 
relative.  Thus  adventitious  utility  has  its  foundations 
deep  down  in  human  nature. 


CHAPTER   XIV 

SOCIAL  PHASES  AND   THE   ECONOMIC   STATUS 
OF  ADVENTITIOUS  UTILITY 

IN  viewing  briefly  the  phases  of  adventitious  utility  we  shall 
touch  upon  certain  socio-psychical  phenomena  involving 
principles  of  general  bearing.  We  need  to  use  the  principles 
that  would  constitute  the  developed  science  of  social  psy- 
chology. But  we  must  perforce  be  content  with  rather 
vague  foreshado wings  of  such  principles. 
/ TThe  phase  of  the  evolution  of  adventitious  utility  that\) 
[first  deserves  attention  is  the  class-standard  in  consump-j 
|  tion.1  This  is  in  part  a  result  of  custom  and  imitation.] 
Passively  to  ride  walking  distances  in  a  vehicle  reserved 
for  one's  exclusive  use  is  perhaps  historically  the  most  con- 
stant mark  of  "class."  The  nobleman  has  always  been 
separated  from  the  commoner  by  habits  of  dress  and  liv- 
ing, and  has  usually  felt  called  upon  to  practice  a  "  noble  ex- 
travagance." j  Customary  distinctions  between  the  classes 
jin  matters  of  consumption  have,  under  cruder  social  con- 
jditions,  frequently  been  enacted  into  laws.  Inequality  in 

1  In  the  chapters  on  adventitious  utility  the  writer  is  greatly  indebted 
,  to  Thorstein  Veblen's  brilliant  contribution  to  sociology  as  well  as  to 
I  economics,  The  Theory  of  the  Leisure  Class,  which  develops  the  theory  of 
adventitious  utility  in  a  different  way  and  under  other  names.  Phases  of 
the  same  thought  are  more  than  hinted  at  by  the  founder  of  political 
economy,  clearly  formulated  by  John  Rae  (New  Principles  of  Political 
Economy,  1834,  book  n,  chap,  xi),  and  forcibly,  though  cursorily,  stated 
by  Senior  (Political  Economy,  1850,  p.  12).  Indeed,  they  appear  as  ele- 
ments in  most  theories  of  luxury.  Among  such  studies  of  importance  may 
be  mentioned:  Baudrillart,  Histoire  du  luxe  prive  et  publique  depuis  I'anti- 
quite  jusqu*  d  nos  jours,  1878-80,  and  Laveleye,  Le  luxe,  1887.    The  con- 
tribution, if  it  may  be  so  dignified,  of  the  present  essay  at  this  point 
j  is  the  restatement  of  these  ideas  in  their  connection  with  fundamental 
doctrines  concerning  utility  and  its  variation.  \ 


SOCIAL  PHASES  OF  ADVENTITIOUS  UTILITY  147 

the  distribution  of  income  is  very  clearly  the  foundation  for 
the  sort  of  adventitious  utility  that  depends  upon  a  class- 
standard.  An  article  that  is  known  to  be  consumed  habit- 
ually by  a  higher  class,  and  by  its  members  chiefly,  has  by 
reason  of  this  fact  a  supervening  utility  in  addition  to  that 
due  to  its  intrinsic  qualities.  ;Purple  in  the  ancient  world 
was  a  badge  of  superiority  specially  fitted  for  this  purpose 
by  reason  of  the  conspicuousness  of  the  color  and  the  high 
cost  of  the  dye.  But  the  splendor  of  the  Tyrian  "purple" 
could  not  survive  the  cheapness  of  red  dyes.  There  have 
been  times  in  the  history  of  civilization  when  drunkenness 
was  the  privilege  and  evidence  of  superior  social  standing, 
whence  the  descriptive  phrase,  "drunk  as  a  lord."  Class 
aspirations  have  of  course  their  good  as  well  as  their  bad 
side  —  their  good  side  especially  in  the  patronage  of 
literature,  science,  and  the  fine  arts.  But  in  practice,  for 
most  of  the  members  of  the  upper  classes,  the  side  most  in 
evidence  has  always  been  adventitious,  and  thus  only  by 
accident  partly  of  good  effect. 

Since  means  have  increased  and  the  outlook  of  the  lower 
classes  has  been  so  much  enlarged  by  education,  the  lines 
/between  classes  are  no  longer  so  definite  as  formerly.  But 
;  industrial  progress  and  the  spread  of  democratic  ideas  have 
only  made  more  intense  the  struggle  to  preserve  marks  of 
social  distinction  already  attained,  or  to  gain  higher  ones. 
"Keeping  up  appearances"  is  the  controlling  factor  in  the 
consumption  of  the  families  that  would  in  England  be 
called  "middle  class."  This  is  obviously  a  phase  of  adven- 
titiousjitility .  /  Inordinately  high  expenditure  for  external 
d  nouse  rent,  compelling  sacrifices  of  utility 
proper,  is  common  among  all  classes  with  limited  incomes. 
The  vogue  of  the  brief  summer  vacation  at  the  seashore 
or  in  the  mountains  and  of  travel  in  general,  especially  for- 
eign travel,  is  to  a  considerable  extent  due  to  adventitious 
utility,  although  here,  as  always,  adventitious  utility  has 
a  more  solid  foundation  of  real  value.  The  extent  of  the 


\ 


148     WELFARE  AS  AN  ECONOMIC  QUANTITY  ' 

demand  for  automobiles  is  now  plainly  much  in  excess  of 
any  utility  proper  which  they  afford. 

Adventitious  utility  is  not  only  the  basis  of  the  imitative 
class  standard  in  consumption,  but  it  is  also  the  great 
factor  in  the  breaking  down  of  external  class  distinctions 
when  economic  conditions  make  this  possible.!  The  domi- 
nance of  the  political  theories  of  the  Revolutionary  Era 
and,  still  more  important,  the  spread  of  well-being  and  the 
enlarged  influence  of  the  middle  class  resulting  from  the 
Industrial  Revolution  brought  about  the  cheapening  and 
discarding  of  fixed  marks  of  class.  With  the  loss  of  fixity 
in  such  distinctions  came  the  dominance  of  fashion-imi- 
tation instead  of  custom-imitation,  to  use  the  phrase  of 
Gabriel  Tarde.  The  lower  classes  are  now  able  to  imitate 
their  "betters,"  and  do.  This  is  in  part  the  cause  of  the 
tendency  toward  unsubstantiality  and  tinsel  in  the  con- 
sumption of  the  poorer  classes.  Continual  change  in 
modes  of  dress  is  now  necessary  in  order  that  the  upper 
class  be  enabled  to  possess  marks  of  distinction  that 
those  below  them  in  the  social  scale  have  not  yet  imitated. 
Fashion  is  thus  a  moderate  but  typical  form  of  ostentation. 
Prompt  imitation  compels  rapid  changes  in  the  garments 
of  "society." 

The  characteristic  quality  of  fashion  appears  to  be  quick- 
ness of  change.  But  in  fact  fashion  is  essentially  conform- 
ism  rather  than  caprice.  It  is  a  good  example  of  one  type 
of  socio-psychic  process,  that  is,  leadership  depending,  not 
on  initiative  or  originality,  but  on  a  delicate  sensibility  to 
the  inarticulate  wants  of  the  majority.  The  street-tough 
gets  his  cue  from  the  gang  and  is  followed  by  them  be- 
cause he  gives  definite  expression  to  their  cravings  and 
impulses.  Our  successful  politician  of  the  lower  order  is  of 
the  same  type.  Likewise,  the  leader  of  fashion  is  no  more 
ruler  than  ruled.  He  (or  she)  is  keener  to  see  the  trend,  or 
economically  more  able  than  others  to  push  things  a  little 
farther  in  the  direction  in  which  the  mass  is  moving,  or  if 


SOCIAL  PHASES  OF  ADVENTITIOUS  UTILITY  149 

the  time  is  ripe,  he  will  begin  the  reaction  at  just  the  "psy- 
chological moment."  That  the  leaders  of  fashion  are  them- 
selves in  turn  the  tools  of  tailors  and  dressmakers  fits  well 
into  the  general  scheme. 

Dress  is  the  great  realm  of  fashion  chiefly  because  it 
affords  the  best  opportunity  for  indulgence  in  adventi- 
tious utility  on  a  small  scale.  It  is  not  true  that  changing 
fashions  in  dress  are  due  to  the  desire  for  change  for  the 
sake  of  change.  Gregariousness  in  wants  is  the  foundation 
of  fashion  and  of  itself  it  would  not  produce  rapid  change. 
The  impulse  to  change  comes  from  another  source,  that 
is,  from  adventitious  utility.  Style  of  dress  is  an  easy  and 
fit  means  of  distinction  and  ostentation,  but  it  may  be 
quickly  imitated,  hence  resort  must  be  had  to  rapid 
change.  On  analyzing  stylishness  we  find  the  suggestion 
of  newness  an  important  element.  But  the  new  style  must 
have  only  the  semblance  of  originality.  The  suggestion  of 
expense  also  is  rather  more  important  than  newness  for  the 
agreeable  effect  of  the  "latest  style."  Newness  itself  is 
scarcely  more  than  a  phase  of  the  suggestion  of  expensive- 
ness.  It  costs  a  great  deal  to  dress  always  in  the  newest 
mode.  It  is  evident  that  the  utility  of  both  these  elements 
of  fashionableness  is  chiefly  adventitious.1 

Running  through  all  adventitious  practices  is  the  sub- 
ornation of  others  to  serve  the  exaltation  of  the  ego.  In 
primitive  times  there  was  scarcely  any  other  way  to  spend 
one's  surplus  than  to  feed  hordes  of  retainers  and  lackeys. 
Nowadays  the  number  of  those  that  minister  to  the  per- 
sonal wants  of  individuals  is  less  noticeable,  partly  because 
there  are  so  many  ways  of  spending  one's  surplus  on  goods, 
partly  because  such  services  have  to  a  large  extent  become 
institutional  and  available  to  all  comers.  It  is  probable  that 
the*  number  of  persons  employed  directly  in  the  service  of 

1  Cf.  Locke,  Lowering  of  Interest,  1692,  pp.  93-94:  "Things  of  fashion 
will  be  had  .  .  .  whatever  rates  they  cost,  and  the  rather  because  they 
are  dear." 


150     WELFARE  AS  AN  ECONOMIC  QUANTITY 

individuals  has  been  declining  of  late  relatively  to  the 
total  population.  But  the  proportion  of  persons  so  em- 
ployed institutionally  has  doubtless  greatly  increased.  As 
to  the  morality  of  such  demands,  they  should  be  viewed  in 
the  light  of  the  Kantian  imperative,  —  so  act  as  to  treat 
humanity  in  every  case  as  an  end,  never  as  means  only.1 
But  so  long  as  human  nature  remains  what  it  is,  some  men, 
if  they  have  the  pecuniary  wherewithal,  will  seek  to  make 
others  mere  means  to  their  ends. 

As  regards  the  moral  quality  of  indulgence  in  adventi- 
tious utility  generally,  it  is  certainly  bad.  There  is  much 
similarity  between  cruelty  and  ostentation,  both  depend- 
ing for  the  enjoyment  they  yield  on  the  opposite  effect 
upon  others,  thus  being  anti-social,  and  objectively,  if  not 
subjectively,  malicious.  The  important  qualification  of 
this  proposition  is  that  envy  of  indulgence  in  adventitious 
utility,  however  general  and  however  much  a  source  of 
unhappiness,  is  irrational  and  itself  a  weakness  or  defect. 
Although  consumption  for  the  sake  of  adventitious  utility 
is  thus  objectively  immoral,  there  is  not  any  subjective 
wrongdoing  or  bad  intention  implied,  owing  to  the  thor- 
oughly conventional  and  social  character  of  such  utility 
and  to  the  resulting  transference  of  feeling  which  makes  it 
pass  for  a  quality  of  goods. 

The  element  of  adventitious  utility  is  to  be  condemned 
/also  from  a  socio-economic  point  of  view,  if  this  can  be 
distinguished  from  the  ethical.  It  is  a  parasitic  after- 
growth that  should  be  pruned  away  from  economic  prac- 
tice. Proper,  particular,  complementary,  and  transputed 
utilities  are  positively  important,  not  merely  in  the  indi- 
vidual, but  also  in  the  social  economy.  Adventitious 
utility,  on  the  other  hand,  cancels  out  in  the  social  sum- 
mation of  welfare;  that  is,  the  enjoyment  of  it  by  one  mem- 
ber of  society  is  accompanied  by  actual  or  presumptive 
subtraction  from  the  enjoyment  of  others.!  The  enjoy- 

1  Kant's  Theory  of  Ethics  (Abbot's  translation),  6th  ed.,  1909,  p.  47. 


SOCIAL  PHASES  OF  ADVENTITIOUS  UTILITY  151 

ment  of  the  one  is  on  the  whole  proportional  to  the  dis- 
agreeable feelings  of  envy  and  humiliation  excited  in 
others.  1  From  the  social  point  of  view  there  is  no  real  need  ! 
1  corresponding  to  adventitious  utility  and  no  benefit  from  it  A 
Ostentation,  and  all  forms  of  adventitious  utility,  how- 
ever, are  still  chiefly  a  private  concern,  or  rather  they  are 
not  proper  subjects  of  regulation  by  law  or  of  drastic  con- 
demnation by  public  opinion.  They  are  of  the  nature  of 
personal  vice  as  much  as  of  social  immorality.  They  can- 
not be  directly  dealt  with  by  society  to  advantage  and  they 
are  likely  to  bring  on  themselves  their  appropriate  punish- 
ment. The  "vanity  of  life"  is  often  only  the  vanity  of 
adventitious  enjoyment  and  of  merely  relative  ambitions. 
/The  foregoing  leads  us  up  to  the  conception  of  value 
fvwithout  utility,  though  utility  is  the  foundation  of  value. 
I  The  clue  to  the  solution  of  the  paradox  lies  in  the  fact  that 
adventitious  utility,  which,  from  a  social  point  of  view,  is 
not  real  utility,  but  only  such  in  opinion,  may  serve  as  a 
basis  for  value.  Value  is,  therefore,  not  necessarily  in  pro- 
portion to  utility  proper,  and  may  exist  without  involving 
any  considerable  element  of  it.  There  is  a  reason  for  the 
difficulty  the  older  economists  sometimes  found  in  this  so 
utterly  contradictory  relation  between  utility  and  value. 
From  the  social  point  of  view,  value  is  not  in  proportion  to 
rationally  attributed  utility,  even  when  we  qualify  utility 
as  marginal.  Adam  Smith  should  be  interpreted  as  mean- 
ing that  the  diamond  has  little  utility  proper  when  he  says 
that  it  has  great  value  but  little  or  no  utility.1  Adventi- 

Wealth  of  Nations,  book  I,  chap,  iv,  p.  30,  of  Caiman's  edition:  "A 
diamond  has  scarce  any  value  in  use;  but  a  very  great  quantity  of  other 
goods  may  frequently  be  had  in  exchange  for  it."  Bohm-Bawerk  criticizes 
this  point  of  view  on  p.  153  of  the  Positive  Theory  of  Capital  (translation), 
in  terms  that  remind  one  of  the  above  passage,  though  he  does  not  men- 
tion Smith  in  this  connection.  Smart,  in  his  Introduction  to  the  Theory 
of  Value,  p.  33,  doubtless  following  Bohm-Bawerk,  is  even  more  explicit 
as  to  the  explanatory  sufficiency  of  the  marginal  utility  due  to  the 
small  quantity  of  diamonds  available.  Bb'hm-Bawerk's  criticism  seems 
to  be  an  echo  of  J.  S.  Mill,  Principles  of  Political  Economy,  book  in, 


r> 

dia: 


152     WELFARE  AS  AN  ECONOMIC  QUANTITY 

tlous  utility  is  not  utility,  but  expense  masquerading  as 
utility.  It  is  valuation  and  mere  economic  value,  without 
utility.  Not  all  wealth,  as  commercially  gauged,  contri- 
butes to  welfare,  j 

There  is  a  tendency  on  the  part  of  merchants  to  accom- 
modate customers  who  wish  to  pay  high  prices  merely 
for  the  sake  of  demonstrating  their  ability  to  pay.  The 
perfect  working  of  such  a  system,  however,  presupposes 
enough  absence  of  competition  to  make  possible  the  dif- 
ferentiation of  charges.  A  fashionable  location  greatly 
helps.  But  the  merchant  may  wish  to  get  the  trade  both 
of  those  who  want  their  money's  worth  and  of  those  who 
want  to  prove  that  they  do  not  have  to  consider  whether 
they  get  their  money's  worth  or  not.  The  device  of  low- 
price  sales  will  sometimes  accomplish  this  purpose.  The 
ignorance  and  pride  of  buyers  may  be  an  efficient  barrier 
between  different  classes  of  customers,  and  only  less  secure 
than  monopoly.  But  in  order  that  such  mercantile  de- 
vices may  work  well,  the  social  distinction  due  to  price 
paid  must  be  clearly  evidenced,  for  example,  by  the  name 
and  location  of  the  "  shop."  There  must  also  usually  be 
the  semblance  of  enhanced  utility  accompanying  the 
higher  price. 

The  relation  of  adventitious  utility  or  luxury  to  taxa- 

, chap,  i,  sec.  2,  who  refers  to  De  Quincey.  To  none  of  these  writers  does  it 
occur  that  what  functions  as  utility  may  be  supposititious. 

In  the  Lectures  of  Adam  Smith,  pp.  176-78,  we  find  the  factors  deter- 
mining price  discussed  in  a  way  similarly  suggestive.  He  enumerates 
three,  the  first  being  demand  or  need.  The  second  is  abundance  or  scarc- 
ity in  proportion  to  need.  This  is  illustrated  by  the  dearness  of  diamonds, 
but  that,  he  says,  is  due  more  to  the  third  factor,  which  is  the  riches  or 
poverty  of  those  who  demand  an  article.  "  When  there  is  not  enough  pro- 
duced to  serve  everybody,  the  fortune  of  the  bidders  is  the  only  regula- 
tion of  the  price."  This  third  factor  does  not  appear  in  the  corresponding 
passage  of  the  Wealth  of  Nations.  But  he  does  say  (book  I,  chap,  xi,  part 
in,  p.  224) :  "In  times  of  wealth  and  luxury  what  is  rare  with  only  nearly 
equal  merit  is  always  preferred  to  what  is  common."  An  especially  pointed 
remark  is  quoted  below  on  p.  184.  Adam  Smith  barely  missed  presenting 
a  developed  theory  of  adventitious  utility. 


SOCIAL  PHASES  OF  ADVENTITIOUS  UTILITY    153 

tion  is  significant.  A  tax  on  an  article  of  luxury  may  not 
decrease  the  demand  but  may  even  have  a  contrary  effect. 
The  higher  the  price  paid  the  more  decisive  is  the  evidence 
of  ability  to  pay  and  of  riches.  It  was  Rae's  view  l  that, 
since  the  consumption  of  articles  of  luxury  is  favored  by 
increase  of  cost,  a  tax  on  luxuries  might  be  used  to  obtain 
public  revenue  without  sacrifice  to  the  consumer.  If  man 
will  incur  expense  for  the  sake  of  expense,  it  is  well  that  the 
state  should  profit  by  the  tendency,  rather  than  that  it 
should  result  merely  in  waste  of  labor.  There  is  certainly 
no  better  evidence  of  "ability  to  pay"  than  the  desire  to 
pay  merely  for  the  sake  of  paying. 

All  of  nature's  wastes,  and  not  merely  those  in  the  field 
of  biology,  are  likely  to  contain  germs  of  future  adapta- 
tion. Adventitious  utility  is  one  of  the  most  conspicuous 
phases,  if  not  the  most  conspicuous,  of  the  waste  of  surplus 
socio-psychic  energy  and  of  pecuniary  means.  Hence  we 
should  expect  the  prodigality  and  the  wastes  of  adventi- 
tious utility  to  contribute  something  to  progress.  The  study 
of  social  evolution  affords  convincing  examples.  The 
striving  for  display  that  expressed  itself  in  decorating  the 
person  furnished  the  foundation  for  the  evolution  of  cloth- 
ing. ^Esthetic  developments  have  been  especially  depend- 
ent upon  originally  extraneous  suggestions,  the  mere 
oddity  of  unusually  fine  and  curiously  colored  textures  and 
designs  first  attracting  attention.;  Scarcely  any  decora- 
tive motive  is  without  its  historic  symbolism.  Prominent 
among  others  are  the  symbols  of  rank  and  riches,  which 
are  impressive  because  of  their  adventitious  nature.  Many 
useful  commodities,  soap  and  cotton  cloth  among  others, , 
first  gained  recognition  as  expensive  foreign  rarities.  The 
high  price  of.  luxuries,  besides,  operates  as  a  stimulus  to 
invention.  All  these  things  may  be  said  in  extenuation  of 
adventitious  utility.  But  they  fall  short  of  justifying  it. 
J  Waste  is  a  question  of  the  proportion  of  results  to  means 
l_New  Principles  of  Political  Economy,  book  in,  chap.  n. 


154     WELFAEE  AS  AN  ECONOMIC  QUANTITY 

j  and  a  matter  of  quantitative  relations,  as  is  the  variation 
;  of  utility.  But  it  is  obvious  that  the  greatest  significance 
of  adventitious  utility  is  not  in  relation  to  the  variation  of 
utility,  in  the  sense  which  makes  that  the  genus  of  which 
diminishing  utility  is  a  species.  The  character  of  the  varia- 
tion of  such  utility  is,  however,  sufficiently  worthy  of  re- 
mark, though  its  protean  nature  makes  any  account  of  it 
seem  unduly  formal  and  abstract.  1 

f"lt  is  sufficient  here  to  consider  the  phenomena  of  social 
^variation  only,  and  first  from  the  point  of  view  of  com- 
(mercial  demand.  Adventitious  utility  thus  viewed  is  al- 
ways equal  to  value  and  is  capable  of  any  degree  of  ex- 
pansion. It  varies  as  a  people's  power  to  spend.  There 
will  come  a  stage  when  a  greater  quantity,  not  only  of 
food,  but  also  of  most  other  goods,  cannot  to  advantage  be 
used,  though  changes  in  quality  may  still  be  valued.  The 
appetite  for  adventitious  utility,  on  the  contrary,  is  quanti- 
;  tatively  insatiable.  The  increase  of  the  amount  of  adventi- 
tious utility  is  limited  only  by  the  increase  of  riches,  that 
is,  of  large  private  fortunes.  But  adventitious  utility  will 
attach  itself  to  different  objects  as  man's  powers  of  pro- 
duction increase. 

From  the  point  of  view  of  the  sum  of  the  individuals 
who  compose  society  and  as  measured  subjectively,  on  the 
other  hand,  the  net  amount  of  adventitious  utility  is  and 
remains  at  zero  or  thereabouts.  The  gain  of  one  is  the  loss 
of  others. 


CHAPTER   XV 

HOSTS  AND  MASKS   OF  ADVENTITIOUS  UTILITY 

ADVENTITIOUS  utility  has  been  called  parasitic.  Parasitism 
is  both  a  biological  and  a  social  phenomenon.  The  cor- 
relate of  the  parasite  in  biology  is  the  "host,"  the  term 
being  borrowed  from  social  relations.  In  bringing  back 
this  term  to  the  field  of  social  science  we  give  it  a  connota- 
tion analogous  to  that  which  it  has  in  biology,  and  there- 
fore somewhat  unusual.  But  the  biological  conception  is 
of  so  much  value  for  social  science  that  this  unusual  sense 
of  the  word  is  not  effective  as  an  objection. 

The  parasite's  host,  at  least  in  the  case  of  so  intelligent 
an  animal  as  man,  must  be  deceived  as  to  the  real  nature  of 
the  relation  existing  between  him  and  the  parasite.  Hence 
the  parasite  must  disguise  itself  and  appear  to  be  some- 
thing different  from  what  it  is.  jit  is  a  permissible  personi- 
fication to  say  that  adventitious  utility  assumes  masks. 
There  is,  of  course,  no  hypocrisy  involved,  and  those  who 
actively  foster  adventitious  utility  are  more  deceived  than 
anybody  else.  But  adventitious  utility  must  appear  to  be 
real  utility  to  get  its  hold  upon  the  consumer.  Its  masks 
are  numerous  and  serve  their  purpose  well. 
r  Adventitious  utility  is  especially  likely  to  cloak  itself 
(in  the  guise  of  aesthetic  enjoyment.?  A  good  criterion  for 
discrimination  is  how  far  substance  is  sacrificed  to  externals 
and  how  far  form  is  determined  by  cost.  Where  the  costli- 
ness is  in  the  material,  great  expensiveness  is  achieved 
with  little  ingenuity.  Costliness  from  expenditure  of  labor 
has  the  advantage  of  requiring  greater  cleverness,  but 
the  rare  material  is  usually  more  impressive  for  the  mass  of 
observers.  Art  is  either  not  yet  evolved  or  it  has  decayed 


156     WELFARE  AS  AN  ECONOMIC  QUANTITY 

when  the  material  surpasses  the  workmanship.  But  exces- 
sive ornamentation  also  is  a  phase  of  decadence  and  of 
adventitious  utility.  The  evidence  and  the  symbols  of 
costliness  are  the  great  pitfall  of  the  fine  arts.  It  is  not  to 
be  absolutely  denied,  however,  that  mere  costliness  may 
be  a  legitimate  factor  in  the  impression  achieved,  though 
its  place  must  be  a  small  one. 

/  Adventitious  utility  can  the  more  easily  pass  for  sesthe- 
(tic  because  the  complementary  relation  plays  so  large  a 
Ipart  in  art.  ]  An  effect  may  be  complementary  in  a  group 
of  effects  wnich  is  adventitious,  and  thus  its  nature  is  less 
directly  observable.  The  analysis  that  reveals  the  com- 
plementary element  is  likely  to  stop  there.  Just  so  Hindu 
mythology  finds  support  for  the  earth  on  the  back  of  an 
elephant,  and  then  —  a  thought  which  probably  occurred 
several  centuries  later  —  for  the  elephant  on  the  back  of 
a  tortoise. 

The  supplying  of  complements  involves  a  possibly  dis- 
proportionate increase  of  utility.  But  a  complement  can 
produce  such  an  effect  only  initially  and  not  while  being 
made  common  and  dominant  in  its  group. \  The  comple- 
mentary value  of  rarity  in  time  —  if  rarity  is  needed  for 
"a  change"  —  is  similarly  limited.  If  a  very  rare  article 
is  made  common  in  a  private  economy,  this  must  be  ulti- 
mately on  grounds  of  expense  and  ostentation,  since  an 
article  common  enough  to  be  used  independently  and  to 
dominate  quantitatively  in  various  groups  can  have  in 
some  of  its  uses  only  particular  utility  based  on  the  strength 
of  its  intrinsic  qualities.  Only  adventitious  utility  can 
provide  the  semblance  of  warrant  for  the  disproportionate 
expense.  The  naturally  complementary  character  of  the  use 
of  the  rare  makes  its  dominating  use,  even  where  the  burden 
can  be  borne,  an  aesthetic  monstrosity.  If  a  merely  impos- 
ing effect  is  sought,  it  may  be  attained  by  such  means, 
but  even  that  will  not  often  bear  analysis.  A  building  of 
polished  marble  is  scarcely  justifiable,  aesthetically  or  eco- 


PARASITISM  OF  ADVENTITIOUS  UTILITY     157 

nomically,  except  as  the  center  of  a  group  not  marble;  but 
the  buildings  constituting  a  "civic  center,"  and  thus  in 
effect  complementary  to  the  other  buildings  of  a  city,  may 
likewise  be  of  marble.  Such  distinction  is  not  appropriate 
for  a  private  house,  but  only  for  a  public  building.  Com- 
fort and  elegance  are  permissible  for  a  private  citizen  if  he 
can  afford  them,  magnificence  never.  The  use  of  marble 
to  trim  a  residence,  however,  may  be  complementary  and 
suitable,  supposing  it  to  be  in  harmony  with  the  other 
material. 

r  Much  aesthetic  development  is  yet  needed  in  order  that 
[people  may  see  the  meaning  and  limitations  of  the  com- 
plementary use  of  the  rare.  Judgment  as  to  what  is  due 
to  intrinsic  qualities  and  what  to  rarity  is  often  difficult 
on  account  of  rarity  being  so  often  supported  by  real  excel- 
lence. This  is  conspicuously  the  case  with  the  precious 
metals  and  precious  stones,  which  possess  great  natural 
beauty  and  durability.  But  the  limit  which  should  be 
fixed  by  their  utility  proper,  or  by  the  utility  proper  of 
the  groups  in  which  they  are  used,  is  often  greatly  sur- 
passed. The  rare  is  often  esteemed  the  one  good  thing  fully 
worthy  of  confident  use.  Aside  from  the  narrow-minded- 
ness of  such  a  course,  —  narrowness  being  admittedly 
often  enough  of  practical  advantage,  —  this  policy  means 
foregoing  the  attempt  adequately  to  utilize  goods. 

The  emphasis  on  genuineness  as  against  show  is  not 
properly  an  emphasis  on  rarity.  As  an  emphasis  on  in- 
trinsic qualities,  it  should  lead  directly  away  from  adventi- 
tious utility.  Show  and  semblance  are  imitations  of  the 
rare  intended  to  appropriate  to  themselves  its  distinction. 
The  motive  is,  of  course,  the  desire  to  obtain  adventitious 
utility,  but  the  effect  is  only  a  weakened  reflection  of  the 
same  quality  of  the  imitated  rare.  The  spread  of  imitations, 
due  to  mistaken  ambitions  of  the  many,  has  introduced,  by 
way  of  contrast,  a  psychical  element  which  does  not  prop- 
erly belong  to  the  consumption  of  the  rare  and  costly. 


158     WELFARE  AS  AN  ECONOMIC  QUANTITY 

Genuineness  should  not  be  thought  of,  nor  sought  for, 
principally  in  this  region.  "  Real "  lace  ought  to  be  dis- 
tinguished by  intrinsic  qualities  instead  of  by  the  fact  of 
its  having  been  painstakingly  made  by  hand. 
/  The  refusal  to  accept  economic  substitutes,  also,  is  not 
las  such  an  emphasis  on  genuineness,  though  it  usually 
'parades  under  that  name.  Substitution  limits  enhance- 
ment of  value.  Substitutes  for  articles  both  of  transputed 
and  of  adventitious  utility  should  be  adopted  in  so  far  as 
it  is  possible  to  do  so  without  undue  sacrifice  of  utility 
proper  or  of  complementary  utility.  A  substitute  is  very 
different  from  an  imitation.  The  former  offers  essential 
qualities;  the  latter,  external  appearances.  It  is  bad  econ-  ? 
omy,  unless  there  is  no  choice,  to  buy  an  article  whose 
price  is  bid  up  by  reason  of  adventitious  considerations.!/ 
It  is  only  in  the  expenditure  of  the  rich  that  we  should 
expect  little  substitution,  and  there  chiefly  because  even 
a  very  great  saving  of  money  will  not  compensate  for 
the  effort  and  thought  required  for  careful  expenditure. 
Among  such,  too,  the  doubt  should  arise  as  to  whether  it 
is  entirely  right,  morally  and  aesthetically,  to  sanction  the 
use  of  what  will  not  ordinarily  be  used  without  abuse^^^ 
The  "best  quality"  is  not  necessarily  the  rare.  It  is  the 
quality  which  best  accomplishes  the  purposes  of  the  good. 
In  so  far  as  the  difference  between  the  best  and  the  less 
good  is  due  to  quantity  of  elaboration  rather  than  to  the 
work  of  nature,  and  in  so  far  also  as  the  labor  can  be  had 
easily  in  increasing  amount,  the  best  certainly  is  not  the 
rare,  for  if  so,  then  the  best  is  merely  what  costs  most. 
The  due  proportion  is  not  the  superlative.  The  best 
quality  of  cloth  is  not  always  of  the  finest  texture.  The 
coarse  article  not  only  has  its  place,  but  may  be  best  for 
some  purposes.  Sail  cloth  for  mercantile  use  would  not  be 
improved  by  great  fineness  of  fiber  and  weave.  The  ap- 
petite for  rarity  and  expense  may  also  find  recondite  forms 
of  skill  as  well  as  expensive  material.  Such  demand  is  too 


PARASITISM  OF  ADVENTITIOUS  UTILITY     159 

often  not  for  intrinsic  excellence  and  genuineness,  but  for 
adventitious  utility.  The  difference  between  the  rare  and 
the  best  should  be  clear  if  strict  attention  is  paid  to  intended 
uses. 

The  indiscriminate  pursuit  of  the  "  best  quality"  means, 
not  only  a  failure  to  adapt  the  qualities  or  grades  of  arti- 
cles to  their  uses  in  a  way  to  make  the  most  of  their  total 
utility,  but  also  frequently  a  misapplication  of  articles 
which  deprives  them  of  their  due  effectiveness.  The  re- 
finement of  consumption  consists,  in  giving  each  kind  and 
quality  its  place,  not  in  finding  room  only  for  the  rare  and 
the  fine.  But  the  former  alternative  makes  greater  de- 
mands on  the  consumer's  intelligence.  Round  steak  is 
more  nourishing  than  the  tenderer  and  more  tasty  cuts, 
and  it  is  only  poor  economy,  that  is,  failure  to  make  the  / 
most  of  the  division  of  use,  that  does  not  give  it  more  of  a 
place  in  the  cuisine  of  the  well-to-do,  though  that  would 
not  be  accomplished  by  serving  it  broiled  rare. 

Natural  differences  should  be  made  the  most  of.  The 
intentional  manufacture  of  inferior  grades  or  qualities, 
merely  for  absolute  cheapness  and  without  regard  to  econ- 
omy, is  a  very  different  matter.  The  merely  coarse  may 
be  more  durable.  But  the  shoddy  clothing  that  will  not 
last  —  perhaps  even  this  material  has  its  proper  place  in 
horse-blankets  —  finds  a  market  only  because  of  ignor- 
ance, or  because  of  adventitious  motives  that  prefer  sham 
to  substance,  or  because  of  a  hand-to-mouth  poverty  that 
makes  it  impossible  to  economize  and  to  provide  ade- 
quately for  the  future  through  using  more  durable  goods. 

If,  as  is  conceivable,  the  best  of  a  class  of  goods  is  so 
very  versatile  as  to  be  the  best  adapted  for  all  the  uses  of 
the  class,  then  the  situation  should  be  dealt  with  accord- 
ing to  the  principles  governing  the  economic  application 
of  the  rare,  that  is,  its  use  should  be  husbanded  for  ex- 
traordinary occasions  and  unusual  complementary  effects. 

Differences  of  "quality"  (fineness)  are  differences  of  de- 


160     WELFARE  AS  AN  ECONOMIC  QUANTITY 

gree  rather  than  differences  of  kind.  Rarity  of  "quality" 
is  not  worthy  of  as  much  esteem  as  the  more  individual 
rarity  of  kind.  But  if  adventitious  effects  are  what  is 
sought,  the  short  and  easy  method  for  the  invidiously 
ambitious  is  to  surpass  competitors  on  their  own  ground. 
Adventitious  utility  here,  as  in  the  case  of  fashionableness, 
favors  but  a  modicum  of  individuality.  It  keeps  too  close 
to  the  throng  to  give  its  wasteful  vagaries  even  their  due 
value  as  experiments.  The  "best,"  in  the  sense  of  the  rare 
quality,  has  an  exaggerated  and  unjustifiable  importance 
in  current  ideas  about  consumption.  The  finer  and  flim- 
sier weaves  of  silk  and  cotton,  —  the  latter,  however,  not 
sold  under  that  name,  —  the  "sheer"  and  the  "delicate" 
fabrics,  used  especially  for  feminine  apparel,  owe  their 
prominence  partly  to  fashion,  but  more  fundamentally 
to  poverty  of  thought.  Those  for  whom,  in  their  own 
opinion,  "  the  best  is  none  too  good  "  are  lacking  in  per- 
spicuity with  reference,  not  merely  to  their  own  qualities, 
but  also  to  the  nature  of  their  surroundings. 

The  connotation  of  elegance,  which  luxury,  as  the  con- 
sumption of  the  rare,  has  acquired,  is  no  more  essential  to  it 
than  is  the  connotation  of  refinement.  Both  are  due  to  sug- 
gestions of  expense  and  of  the  results  expense  may  be 
expected  to  produce.  Such  association  of  ideas  is  quite 
extrinsic.  Evident  lavishness  in  the  use  of  money,  as  well 
as  of  goods,  is  the  opposite  of  elegant. 
f^No  kind  of  thing  that  presupposes  much  expense  or 
much  leisure  remains  without  the  taint  of  adventitiousness. 
The  most  trivial  and  the  most  important  matters  are  alike 
made  to  serve  this  interest.  What  is  "good  form"  and 
good  inanners  is  very  largely  determined  by  such  considera- 
tions. So-called  "  culture,"  as  well  as  manners,  may  be- 
come chiefly  a  mark  of  leisure.  So-called  "literature,"  that 
is,  polite  letters,  loses  its  relation  to  life  and  is  to  be  differ- 
entiated as  that  portion  of  things  written  and  printed 
which  can  be  put  to  no  practical  use,  or  has  demonstrable 


PARASITISM  OF  ADVENTITIOUS  UTILITY     161 

value  only  on  account  of  its  immediate  appeal  to  such 
emotions  as  do  not  impel  to  action,  that  is,  the  sensibilities 
and  sentiments.  The  literature  of  the  sciences  according 
to  this  point  of  view  —  which  it  should  be  said  is  more 
often  approximated  or  implied  than  definitely  accepted  or 
expressed  —  is  no  longer  "literature,"  nor  does  familiar 
acquaintance  with  it  afford  "culture."  Philosophy  is  not 
"literature."  History  is  not  "literature."  Only  poetry  and 
fiction  are  entitled  to  the  name.  The  fine  arts  show  analo- 
gous tendencies.  Most  art  is  aristocratic,  too  much  the 
satellite  and  parasite  of  the  leisure  class.  Use  and  beauty 
are  divorced.  Much  labor  in  the  making  and  an  adventi- 
tious manual  dexterity  is  considered  more  important  than 
the  skill  of  eye  and  mind  that  avails  itself  of  the  accuracy 
and  speed  of  machines.  The  man  of  "cultivated  tastes" 
must  be  removed  from  realities  and  unfit  for  work.  Lit- 
erature, culture,  and  the  fine  arts  —  thus  made  to  have  an 
antithetical  relation  to  physical  environment  and  to  social 
needs  —  become  creatures  of  fad  and  fashion.  Of  course 
there  are  others  for  whom  these  words  have  a  very  different 
meaning.  Indeed  it  is  essential  to  the  nature  of  adventitious 
utility  that  it  have  a  foundation  in  real  values. 

So  it  is  that  adventitious  utility  is  mixed  with  other 
elements  in  accordance  with  its  parasitic  nature.  The  mo- 
tives of  human  choice  and  action  are  in  general  mixed,  but 
nowhere  more  so  than  in  certain  complex  phases  of  con- 
sumption. Adventitious  utility  is  difficult  to  observe  clear 
of  entanglement  with  real  utility,  and  is  in  fact  entirely 
separable  only  by  abstraction.  Though  a  dish  be  favored 
chiefly  because  it  is  expensive  and  known  to  be  so,  it  is 
likely  to  have  also  real  excellences.  But  perhaps  the  case 
most  thoroughly  mixed  in  the  entire  field  of  consumption 
is  that  of  tobacco-smoking.  Learning  to  smoke  does  not 
result  from  direct  and  immediate  enjoyment  of  the  process. 
The  boy,  in  college  or  before,  feels  that  it  makes  him  a 
man  to  smoke.  The  habit  probably  never  loses  some  such 


162     WELFARE  AS  AN  ECONOMIC  QUANTITY 

adventitious  appeal.  It  suggests  leisure,  and  may  be  made 
evidence  of  considerable  expenditure.  It  is  often  merely 
a  pretentious  kind  of  idleness.  The  habit  is  also  to  some 
degree  an  aid  to  sociability.  The  smell  of  smoke  is  intrin- 
sically pleasant  to  some  people  and  one  can  learn  to  appre- 
ciate the  taste.  It  has  been  suggested  also  that  the  suck- 
ing movements  involved  are  primitively  and  instinctively 
pleasant.  This  is  doubtless  a  vague  reminiscence  of  the 
time  when  such  a  use  of  the  lips  was  of  vital  importance. 
Finally,  when  the  habit  is  established,  there  may  be  a  real 
dependence  on  the  properties  of  the  weed.  Smoking  may  be- 
come the  most  valued  of  personal  indulgences.  The  utility 
of  smoking  is  thus  highly  conglomerate.  Wherever  adven- 
titious utility  enters  into  consideration,  it  is  almost  sure  to 
be  but  one  element  in  a  complex  situation.  This  fact  renders 
all  the  greater  the  need  of  taking  thought  about  such  mat- 
ters. That  articles  of  adventitious  utility  always  have  other 
sorts  of  utility  increases  the  danger  of  harboring  this  pest. 
/We  need  a  preacher  of  the  immorality  of  the  superlative, 
ir  at  least  of  that  sort  of  superlative  which  is  valued  for  its 
fiexclusiveness.  Striving  for  such  a  "best"  is  the  common- 
\est  cause  of  failure  to  "hold  fast  that  which  is  good.f  So 
much  of  good  in  human  achievement  is  motived  by  ambi- 
tion and  related  feelings,  and  we  are  so  accustomed  to 
looking  for  the  effects  of  ambition,  both  good  and  evil,  only 
in  things  of  heroic  dimensions,  that  the  evil  influence  of 
such  feelings  upon  the  daily  practices  of  most  of  us  escapes 
notice.  To  insist  upon  the  use  of  the  superlative  in  mere 
means,  and  in  any  merely  material  thing,  is  to  turn  away 
from  the  good.  Ends  and  aims  should  be  the  highest  and 
the  best.  But  material  means  —  in  other  words  economic 
goods  —  should  be  whatever  serves  the  purpose  efficiently 
at  small  cost.  Searching  out  and  competing  for  the  "best," 
as  conventionally  understood,  constitutes  one  of  the  most 
serious /of  economic  wastes,  and  therefore  a  grave  moral 
wrongy 


CHAPTER   XVI 

MULTIPLE  UTILITY 

A  GOOD  or  service  collectively  enjoyed  has  the  character  of 
utility  simultaneously  in  relation  to  two  or  more  consumers. 
The  appropriate  name  for  this  capacity  is  multiple  utility. 
Such  institutions  as  the  theater,  the  museum,  the  public 
park,  and  the  public  library  possess  multiple  utility.  Most 
means  of  instruction  and  amusement  either  have  or  are 
capable  of  having  this  character.  /  Professional  services  of] 
this  nature  can  be  economically  used  only  through  sucly 
collective  enjoyment^ 

"Public  service"  is  a  phrase  much  heard  in  these  days. 
It  should  mean  service  rendered  to  the  public  generally, 
whether  in  a  governmental  or  private  capacity,  thus  hav- 
ing in  greater  or  less  degree  the  character  of  multiple  utility! 
Such  services  are  often  personal  in  the  sense  of  having  for 
their  object  the  person  or  persons  who  constitute  the  public. 
The  possibilities  of  expansion  of  this  sort  of  work  are  par- 
allel in  extent  and  importance  with  those  of  the  material 
forms  of  multiple  utility.  The  supply  of  those  who  are 
competent  to  undertake  such  service  is  steadily  increasing. 
That,  however,  is  as  much  the  result  of  the  increasing 
wealth  of  society,  and  especially  of  certain  classes,  as  it  is 
of  increasing  humanitarian  interest.  But  the  writer  is  here 
concerned  rather  with  such  multiple  utility  as  is  embodied 
in  material  goods. 

The  material  goods  especially  susceptible  of  multiple  use 
are  those  possessing  predominantly  existential  utility.  In- 
deed existential  and  multiple  utility  have  much  in  common. 
The  former  relates  to  plural  use  in  the  time  dimension;  the 
iatter  is  plural  contemporaneously  or  socially,  that  is,  in  a 


164     WELFARE  AS  AN  ECONOMIC  QUANTITY 

]  sense,  spatially.    The  possibility  of  thus  realizing  much 
j  utility  at  relatively  small  cost  holds  for  both.   Temporal 
*  plurality  of  use,  moreover,  is  a  condition  specially  favor- 
able to  the  social  multiplication  of  use.  Though  not,  like 
multiple  utility,  by  nature  and  definition  social,  existential 
utility  may  be  the  more  easily  socialized  by  reason  of  its 
existential  character.  But  services  also,  though  processive, 
may  have  multiple  utility.  The  utility  of  a  dramatic  per- 
formance is  usually  such.  [ 

i  It  would  perhaps  be  logical  to  make  a  distinction  between 
socialized  existential  utility  and  strictly  multiple  utility. 
A  book  in  a  public  library  cannot  well  be  used  by  more  than 
one  person  at  once.  But  in  economic  and  social  character 
the  uses  made  of  it  are  not  essentially  different  from  the 
use  made  of  a  painting  in  a  public  art  gallery.  Moreover, 
the  housing  of  both  book  and  picture  is  of  multiple  utility. 
If  books  could  not  be  used  by  many  in  succession  without 
appreciable  loss,  the  situation  would  be  different.  Strictly 
multiple  utility  is  the  highest  type  of  the  utilities  corre- 
sponding to  a  group  of  modes  of  utilization  which  possess  in 
varying  degree  the  same  social  or  collective  character.  To 
use  the  term  to  represent  the  entire  group  seems  scarcely 
avoidable. 

f    The  inducement  to  socialization  of  enjoyment  is  the  in- 

I  crease  of  its  amount  thereby  effected.    The  cost  of  goods 

:  to  a  circle  of  consumers  constrains  to  the  socialization  of 

enjoyment,  in  so  far  as  the  nature  of  the  utility  permits. 

In  strictly  multiple  utility  there  is  no  appreciable  diminu- 

f  tion  of  enjoyment  for  one  person  by  the  simultaneous 

\jenjoyment  of  the  same  object  on  the  part  of  others.  \The 

enjoyment  is  as  often  increased  for  the  individual  by 

reason  of  its  sociality  or  group  character  as  it  is  diminished 

by  the  breaking  over  of  individual  exclusiveness.   Unless 

physical  conditions  require  exclusiveness  of  use,  the  utility 

due  to  this  condition  is  in  fact  as  much  apparent  as  real,  for 

the  exclusiveness  is  often  not  the  means  of  enjoyment  but 


MULTIPLE  UTILITY  165 

its  adventitious  end.  So  far  as  it  is  adventitious  it  should  of 
course  have  no  weight  with  the  economist. 
/  In  practice  the  tendency  to  socialization  of  utility  usually 
/depends  upon  the  ability  and  inclination  of  a  larger  circle 
i  to  contribute  to  meeting  the  expenses.    The  process  of 
I  socialization,  therefore,  is  conditioned  by  and  dependent 
upon  a  considerable  degree  of  equality  of  means  and  also  of 
tastes.  In  the  case  of  utilities  publicly  maintained  and  fr 
jthe  former  condition  is  removed  and  the  latter  made  the    ff 
more  important  as  alone  limiting  the  extent  of  multiple 
enjoyment.! 

(  Public  property  has  developed  largely  with  reference  to 
(the  supplying  of  multiple  utilities.    The  police  function 
I  itself  might  be  so  viewed!  and  certainly  in  the  performance 
;of  its  cultural  functions,  the  state  acts  with  direct  and  al- 
most exclusive  reference  to  such  utilities. 
r  A  calculation  to  determine  whether  a  great  public  work 
/should  be  undertaken  ought  not  to  confine  itself  to  the 
consideration   of   merely   economic   or    market   values. 
i  Utilities  below  the  margin  —  which  in  the  case  of  the  poor 
are  by  no  means  necessarily  small  —  should  have  weight. 
Number,  furthermore,  may  outweigh  high  degree,  and 
\  multiple  utility  means  numerous  uses.)  The  extent  and 
importance  of  the  benefit,  with  little  reference  to  ability 
or  inclination  to  pay  for  it  in  the  concrete  details  of  its 
supply,  are  the  things  to  be  considered.  This  is  often  over- 
looked in  the  debate  over  questions  of  public  ownership  in 
a  way  that  makes  some  of  the  arguments  against  such  a 
policy  ridiculously  inept.  \ 

f  It  so  happens  that  it  is  especially  multiple  utility  whose 
benefits  are  least  adequately  estimated  in  terms  of  the 
present  and  personal.)  Since  the  immediate  utility  of  means 
of  communication  and  transportation  is  definite  and  tangi- 
ble, it  would  be  possible  to  leave  these  entirely  to  the  care 
of  private  interests.  But  there  are  so  many  indirect  bene- 
fits to  be  obtained  from  good  facilities  for  such  purposes 


166     WELFARE  AS  AN  ECONOMIC  QUANTITY 

that  it  is  sound  public  policy  for  the  state  to  favor  the  mul- 
tiplication of  their  use.  Public  roads  free  to  all  are  now 
taken  as  a  matter  of  course.  Because  of  the  permanent  and 
social  character  of  the  enjoyment  of  objects  of  art,  more- 
over, heavy  expenditure  for  architecturally  fine  public 
buildings  is  justifiable.  JThe  needs  of  transportation,  com-! 
munication,  instruction,  recreation,  and  culture  are  rightly 
felt  to  be  proper  fields  for  the  extension  of  collective  en- 
terprise in  the  supply  of  objects  and  services  of  multiple? 
utility.' 

i   For  the  sake  of  promoting  the  cultivation  of  multiple 
Utilities,  the  state  may  properly  change  an  economic  into 

;a  free  good.  This  it  is  coming  generally  to  do  in  the  case  of 

[  elementary  education.  It  does  not  follow  that  because  such 
utility  can  thus  be  obtained  without  direct  pecuniary  cost, 

•[it  is  to  be  had  entirely  without  cost  or  effort.  There  is 
always  considerable  indirect  pecuniary  cost,  not  to  mention 
other  costs.  \  The  utility  of  primary  education  is  likely,  be- 
cause "free,"  to  be  obtainable  only  in  the  more  direct  pro- 
portion to  effort.  This  policy  is  therefore  not  at  all  social- 
istic.] Compulsory  attendance  at  free  schools  up  to  the  age 
of  thirteen  or  fifteen  years  would  mean  for  the  majority  of 
parents  a  very  considerable  increase  in  the  burden  of  edu- 
cating their  children: 

To  consider  the  educational  activity  of  the  state  merely 

/from  the  point  of  view  of  direct  marginal  utility  to  the  indi- 
vidual does  it  great  injustice.  By  affording  through  its 
schools  some  approach  to  equality  of  opportunity,  the  state 
intensifies  the  effectiveness  of  that  competition  which  is, 
in  the  conception  of  individualistic  economics,  the  chief 
means  to  maximum  production.  Education  is  therefore  not 
only  of  direct  and  immaterial  utility,  but  it  is  highly  pro- 
ductive of  wealth,  and  the  more  so  if  it  is  free.  A  mis- 
taken economic  individualism  in  such  matters  is  thus  met 
and  overcome  on  its  own  ground.  But  it  is  a  poor  concep- 
tion of  the  duty  of  society  that  allows  one  to  assume  com- 


MULTIPLE  UTILITY  167 

mercial  advantages  to  constitute  the  adequate  and  only 
justification  for  the  policy.  The  furnishing  of  educational 
opportunities  in  the  broadest  sense  may  well  be  considered 
the  great  positive  function  of  the  state^ 

The  dependence  of  public  health  upon  an  unrestrained 
or  even  a  lavish  use  of  water  makes  detailed  adjustment 
of  charges  to  costs  destructive  of  collective  utility.  On 
account  of  the  large  amount  of  fixed  charges  involved,  also, 
any  such  system  is  likely  to  be  uneconomical.  Owing  to  the 
contagious  character  of  certain  diseases,  especially  of  filth 
diseases,  and  to  the  social  importance  of  sanitation,  the  use 
of  such  an  object  of  collective  utility  as  a  public  water 
system  cannot  well  be  regulated  by  separate  individual 
interests  and  by  such  principles  of  atomized  marginal 
utility  and  commercial  value  as  manifest  themselves  in 
the  market. 

Where  the  benefits  resulting  from  state  activity  are 
more  distinctly  and  tangibly  of  the  nature  of  pecuniary 
advantage  to  the  individual,  it  is  possible  for  the  state  to 
charge  the  user  in  proportion  to  use  without  materially 
reducing  the  resulting  sum  of  utility,  unless  the  incidentals 
of  such  a  system  are  too  vexatious.  This  is  the  case  with 
public  highways  and  with  transportation  facilities  gener- 
ally. The  omission  of  a  charge  may,  also,  sometimes  be 
justified  on  the  ground  of  the  indirect  cultural  benefit  of 
unhampered  economic  and  social  interchange  of  goods  and 
ideas.  Market  principles  are  at  least  very  largely  modified 
in  all  such  cases  by  considerations  of  public  policy.  The 
most  notable  instance  of  such  modification  is  the  system  of 
charges  for  the  transportation  and  delivery  of  mail.  /The 
economy  of  large  and  unified  means  of  production  is  not  in 
itself  a  strong  argument  for  state  enterprise  in  industry. 
The  reasons  are  usually  other  than  this,  and  are  often 
sufficiently  good  to  justify  the  use  of  the  proceeds  of  taxa- 
tion to  assist  an  enterprise  apparently  merely  economic  in 
character. 


168     WELFARE  AS  AN  ECONOMIC  QUANTITY 

Public  works  are  largely  wealth-producing  as  well  as 
productive  of  psychical  income  in  the  form  of  immaterial 
collective  utility.  The  funded  and  capitalistic  nature  of 
expenditures  for  permanent  material  constructions,  how- 
ever, gives  them  a  peculiar  character.  Ought  the  market 
rate  of  interest  to  limit  the  amount  of  expenditure  for  such 
a  purpose?  Despite  the  fact  that  the  state  or  society  may 
be  conceived  to  be  immortal,  and  the  duration  of  its  needs 
therefore  to  be  indefinitely  long,  the  current  rate  of  interest 
ought  to  determine  the  proper  limit  of  fixed  investment  for 
the  sake  of  obtaining  multiple  utilities,  that  is,  in  so  far  as 
abstract  durability  and  solidity  of  construction  are  con- 
cerned. Since  the  money  for  such  public  works  is  usually 
borrowed,  the  running  interest  charge  makes  obvious  the 
need  of  economy  in  this  particular.  But  the  economic 
principle  would  be  the  same  if  the  means  came  from 
revenue.  Hence  durability  must  be  influenced  by  the  cal- 
culated interest  charge.  But  interest-cost  is  not  all  that 
is  to  be  considered. 

There  is  an  income  of  enjoyment  to  be  had  from  archi- 
tectural excellence  in  a  public  building  which  may  well  be 
set  over  against  a  considerable  part  of  the  interest.  Not 
only  so,  but  the  aspect  and  reality  of  solidity  and  perma- 
nence are  no  inconsiderable  element  in  the  architectural 
effect.  For  this  reason  public  buildings  should  be  solid 
as  well  as  comely,  more  solid  and  more  comely  than  could 
be  justified,  in  view  of  the  interest-cost  of  durability,  by 
figuring  according  to  the  principles  of  private  economy. 
It  is  appropriate  that  government  buildings  designed  for 
permanent  use  should  be  monumental.  It  is  direct  collec- 
tive utility,  not  the  immortality  of  the  state,  that  justifies 
building  for  the  ages.  Such  utility  of  course  could  not  find 
adequate  expression  through  the  purchasing  power  of  the 
many  who  enjoy  it.  The  enjoyment  of  it  is  mainly  inci- 
dental or  even  subconscious,  but  in  it  are  contained  ele- 
ments of  the  highest  human  importance. 


MULTIPLE  UTILITY  169 

Another  form  of  public  or  national  wealth  which  does 

not  receive  adequate  care  if  left  to  divided  and  merely 

individual  interest  consists  of  the  natural  advantages  and 

resources  of  a  country  .*|  Especially  where  the  utility  in 

question  is  unimputable  to  isolated  units  of  supply,  the 

economical  use  and  due  conservation  of  such  sources  of 

production  and  enjoyment  should  be  an  important  care  of 

the  state.   Perhaps  the  most  clear  and  convincing  case  is 

the  duty  of  the  state  to  preserve  the  natural  beauties  of  its 

environment.  J  The  utility  involved  is  both  unimputable 

/  and  multiple.    Partly  for  similar  reasons,  partly  in  the 

|  interest  of  production,  the  state  should  care  for  the  pres- 

l  ervation  of  forests./ 

The  prevention  of  wasteful  exploitation  and  rapid  exhaus- 
tion of  limited  and  irreplaceable  natural  resources,  such 
as  mines,  is  also  a  legitimate  public  function.  But  here 
regard  for  the  future  requires  hardly  more  than  the  appli- 
cation of  the  principles  of  discount  and  interest,  especially 
since  the  possible  developments  of  invention  make  some- 
what unpredictable  just  what  the  material  needs  of  future 
generations  will  be.  For  example,  we  do  not  know  how  long 
man  will  care  to  procure  heat  and  power  from  coal.  There 
can  be  no  question  of  preserving  mineral  resources  abso- 
lutely. The  rate  of  exhaustion,  it  is  true,  should  not  be 
more  rapid  than  the  regular  discounting  of  the  future 
makes  profitable,  but  this  check  is  already  operative 
through  private-economic  principles.  Perhaps  in  some 
countries  the  state  may  be  more  far-sighted  than  the  indi- 
vidual, but  this  is  not  as  yet  true  in  the  United  States.  The 
utility  of  a  future  supply  of  minerals  is  in  the  main  imput- 
able,  and  the  future  in  such  cases  may  be  left  mainly  to  the 
care  of  private  interest.  In  general  the  method  of  working 
natural  resources,  rather  than  the  rate  at  which  they  are 
to  be  worked  out,  is  the  more  fit  matter  for  state  inter- 
ference. 
The  recently  awakened  interest  of  the  American  people 


170     WELFARE  AS  AN  ECONOMIC  QUANTITY 

in  "conservation"  is  possibly  of  greater  general  than  speci- 
fic importance.  There  is  work  to  be  done  to  retain  for  the 
public  the  benefit  of  public  lands.  Butjthe  demand  for 
economical  social  utilization  in  place  of  exploitation  for  the! 
sake  of  individual  profits  contains  the  germ  of  a  social! 
consciousness  that  means  much  more  than  the  preserva-' 
tion  of  forests  and  of  mineral  resources,  i 

In  so  far  as  the  state  or  the  government  can  act  as  vicar 
or  surrogate  for  the  mass  of  the  people  in  respect  of  luxur- 
ious expenditure,  luxury  loses  its  egoistic  and  invidious 
character  and  receives  enhanced  social  importance  by 
acquiring  multiple  utility]  Much  public  expenditure  can 
be  justified  where  the  identical  sort  of  consumption  could 
with  difficulty  find  valid  excuse  in  the  case  of  a  private  indi- 
vidual. The  architecture  of  public  buildings,  as  already 
suggested,  ought  to  be  imposing  and  inspiring.  Even  merely 
decorative  effects  are  worth  paying  for.  {Public  "luxury" 
that  is  truly  entitled  to  the  name  lacks  the  invidious  orf 
adventitious  element] 

Even  when  the  expense  appears  unjustifiably  great  in 
relation  to  its  object,  it  is  less  a  luxury,  in  the  sense  of  in- 
volving disproportionate  expenditure,  because  of  the  mul- 
tiple character  of  the  utility.  Public  festivals  that  riot  in 
display  are  not  as  wasteful  as  they  seem.  But  the  applica- 
tion of  the  public  money  to  luxuries  should  usually  be  for 
permanent  results  and  for  more  or  less  directly  educational 
purposes.  This  educational  quality  is  characteristic  of 
expenditures  for  aesthetic  and  moral  objects,  for  museums 
and  the  theater,  and  for  celebrations  and  monuments  of 
historically  important  and  still  significant  events. 

Public  luxury  such  as  is  beyond  the  reach  of  the  poor 
otherwise  than  through  public  participation  may  take  the 
place  for  them  of  exclusive  and  expensive,  but  otherwise 
analogous,  indulgences  of  the  rich.  Such  an  opportunity 
has  for  the  poor,  in  effect,  quasi-complementary  utility. 
A  public  art  museum  is  a  quasi-complementary  good,  the 


MULTIPLE  UTILITY  171 

/more  valuable  in  proportion  to  the  dinginess  of  ordinary 

life.  Heavy  expenditure  for  decorative  effects  in  churches 

(  and  public  buildings  is  often  for  this  reason  desirable  where 

good  taste  would  not  permit  it  in  a  mere  private  dwelling. 

For  a  semi-public  class  of  citizens,  however,  such  as  he- 
reditary nobility  or  the  members  of  a  royal  family,  or  even 
a  permanent  high  official  class,  magnificence  of  private 
life  is  sometimes  permissible,  supposing  the  public  mind  is 
favorably  disposed.  But  in  view  of  the  spread  and  in- 
creasing dominance  of  democratic  feeling,  this  exception  is 
rather  of  historical  interest  than  of  present  importance. 

It  matters  not  that  the  luxury  of  the  governing  classes 
and  of  the  state  has  sprung  from  personal  and  egoistic 
motives  without  thought  of  multiple  utility.  Here,  as 
often,  social  importance  and  moral  justification  for  insti- 
tutions whose  origin  and  history  call  for  a  different  judg- 
ment may  come  to  exist  through  gradual  evolutionary 
change.  The  magnificence  of  a  monarch's  court  may  be 
for  the  people  the  adequate  symbol  of  national  life  and 
power.  The  richness  of  mediaeval  religious  architecture 
and  ritual  found  response  in  popular  emotion.  A  state 
church  may  be  justified  on  grounds  of  quasi-complemen- 
tary utility;  but  only  in  relation  to  a  particular  people's 
psychology. 

With  the  advance  of  democracy  and  the  general  increase 
of  comfort,  kings,  noblemen,  and  gentlemen  are  less  likely 
to  be  faithfully  accepted  by  the  people  as  surrogates  in 
consumption.  Public  expenditure  must  become  more  utili- 
tarian and  directly  social,  instead  of  merely  magnificent 
and  representative.  But  the  merely  individualistic  inter- 
pretation of  the  state's  functions  remains  economically 
inadequate,  being  neither  just  to  the  past  nor  a  competent 
guide  for  the  future.  Neither  in  ethics  nor  in  economics  is 
mere  self-development  a  sufficient  formula  for  human 
destiny.  The  utility  of  civilization  itself  is  multiple.  I 

There  are  great  opportunities  for  the  extension  of  state 


172     WELFARE  AS  AN  ECONOMIC  QUANTITY 

action  in  the  service  of  multiple  utility.  These  possibilities 
are  being  more  and  more  cultivated.  But  if  there  is  a  ten- 
dency to  socialize  certain  forms  of  enjoyment,  it  is  just  as 
true,  on  the  other  hand,  that  the  organization  of  new  forms 
of  enjoyment  and  the  further  refinement  of  consumption 
is  to  be  chiefly  the  work  of  individualistic  impulses.  Hence 
we  need  expect  no  radical  disturbance  of  the  balance  be- 
tween social  and  private  utilities,  but  only,  in  so  far  as 
means  permit,  a  richer  development  of  both. 


CHAPTER    XVII 

THE  VARIATION  OF  UTILITY  IN  RELATION  TO 
CONSUMER'S  RENT,  INDIVIDUAL  AND  SOCIAL 

/  THE  doctrine  of  consumer's  rent  or  consumer's  surplus  is  a 
corollary  of  the  principle  of  diminishing  utility,  that  is,  of 
the  prevailing  conception  of  the  variation  of  utility.  The 
efficiency  of  the  factors  of  production  is  measured  by  the 
quantity  and  variety  of  products,  but  the  efficiency  of  the 
social  economy  cannot  be  determined  short  of  the  effective- 
ness of  the  utility  realized.  Consumer's  rent  is  the  kernel  of 
this  last  matter.  The  foregoing  development  of  the  varia- 
tion theory  should  enable  us  to  approach  this  subject 
equipped  for  more  positive  results  than  are  obtainable  from 
an  inadequate  conception  of  mere  diminishing  utility]! 

Whether  the  term  "rent"  or  "surplus"  is  the  better  des- 
ignation of  this  sort  of  realized  utility  is  open  to  question. 
Certainly  the  former  term  is  rather  much  overworked 
and  without  a  well-settled  meaning.  But  the  thing  desig- 
nated is  not  a  fund  but  a  continually  replenished  flow. 
"Rent"  is,  at  any  rate,  income.  It  may  be  described  as  a 
succession  or  temporal  series  of  surpluses.  Hence  the  term 
"  consumer's  rent,"  which  recognizes  the  character  of  the 
utility  in  question  as  income,  is  preferred  to  the  other.] 

The  doctrine  of  consumer's  rent  has  suffered  from  mis- 
direction at  the  hands  of  its  name-father,  Alfred  Marshall.1 

1  Principles  of  Economics,  book  in,  chap,  iv,  1st  ed.,  1890,  p.  175, 
where  the  term  "consumer's  rent"  is  used.  In  a  footnote  Marshall  says: 
"The  account  of  Consumer's  Rent  is  here  reproduced  with  slight  altera- 
tions from  some  papers  printed  for  private  circulation  in  1879."  In  the 
5th  edition,  1907,  the  term  "consumer's  surplus"  appears.  In  1890,  the 
concept  is  defined  practically  in  terms  of  price.  The  author's  confidence 
in  the  suitability  of  money  for  the  measurement  of  consumer's  rent  con- 
tinues unabated.  An  acute  critic  of  this  conception  (Hobson,  Economics 


174     WELFARE  AS  AN  ECONOMIC  QUANTITY 

j  The  point  of  view  of  this  essay  is  quite  incompatible  with 
/  his  notion  that  it  can  be  measured  in  terms  of  money.  This 
:  is  one  more  mistaken  idea  consequent  upon  the  economist's 
j  too  exclusive  attention  to  the  external  and  the  commercial. 
The  effect  of  the  difference  in  the  value  of  money  as  be- 
tween different  individuals  may  be  avoided  by  keeping  to 
the  point  of  view  of  a  single  individual,  though  this  makes 
the  money  measure  of  consumer's  rent  of  little  interest. 
What  a  man  will  or  may  conceivably  pay  for  an  article, 
however,  is  even  so  not  a  safe  measure  of  its  contribution  to 
his  satisfaction,  because  the  amount  may  measure  instead 
the  exigency  of  his  situation  or  the  strategic  position  of  the 
article  in  relation  to  the  relative  supply  and  demand  of  it 
and  other  articles.  In  other  words,  transputed  utility  is  not 
a  part  of  consumer's  rent.  That  portion  of  the  value  of  an 
article  which  is  transputed  is  not  based  upon  its  own  utility; 
the  basis  is  the  contribution  to  satisfaction  of  a  complete 
good,  in  which  the  conspicuousness  of  the  member  having 
transputed  utility  may  be  due  to  an  accident  of  commerce. 
If  transputed  utility  could  be  considered  a  part  of  consum- 
er's rent,  that  utility  might  in  the  entire  consumer's  rent  of 
an  individual  be  counted  any  number  of  times.  Even  if  we 
take  account  of  the  high  value  of  money  to  those  who  possess 
so  little  of  it,  the  total  utility  of  the  "submerged  tenth" 
must  be  reckoned  as  less  than  proportionate  to  what  is  paid 
for  food,  because  their  circumstances  impart  to  necessa- 
ries a  high  degree  of  transputed  utility.  That  portion  of 
total  utility  which  we  call  consumer's  rent,  though  nomi- 
nally positive,  may  then  be  actually  negative.  Neces- 
saries are  valued  no  more  than  in  proportion  to  their  con- 
tribution to  satisfaction  only  when  such  goods  as  those  to 
the  enjoyment  of  which  they  are  preliminaries  are  also 
available.  For  the  developed  consciousness,  under  favor- 

of  Distribution,  1900,  chap,  n)  still  retains  valuation  in  money,  but  limits 
the  possible  amount  of  an  individual's  consumer's  rent  to  his  income  or 
even  to  his  savings. ' 


CONSUMER'S  RENT  175 

able  circumstances,  bare  necessaries  make  no  appreciable 
direct  contribution  to  satisfaction. 

Consumer's  rent  is  a  quantity  that  cannot  be  measured 
in  money.  The  amount  normally  due  to  the  utility  of  one 
article  may  be  subject  to  subtraction  for  the  sake  of  trans- 
putation  to  another.  The  higher  ranges  of  the  hypothetical 
curve  of  demand  give  no  secure  foundation  for  the  calcu- 
lation of  amounts  of  consumer's  rent. 
/  If  consumer's  rent  is  often  much  smaller  than  a  wrong 
method  of  measurement  would  make  it  appear  to  be,  it  is 
also  sometimes  greater  than  what  is  indicated  by  purchase 
prices  obtained  or  reasonably  to  be  expected  for  the  goods 
which  contribute  to  it.  j  In  previous  chapters  we  have  shown 
how,  through  substitution  and  rearrangement,  the  elasti- 
city of  consumption  groupings  usually  makes  complemen- 
tary utility  a  net  contribution  to  welfare,  against  which 
there  is  no  compensating  offset  in  the  form  of  money-cost. 
Purchase  price,  even  for  the  marginal  unit,  is  proportioned 
to  particular  utility  rather  than  to  particular  plus  comple- 
mentary utility.  / 

/    Unimputable  utility  is  another  important  element  of  con- 
'  sumer's  rent  that  cannot  be  measured  commercially.  It  is 
j  only  misleading  to  attempt  to  state  its  quantity  in  terms  of 
}'  money] 

I  Consumer's  rent  is  the  total  utility  less  the  summated 
/marginal  utility  of  a  supply  of  goods.  Or,  in  the  case  of  a 
collection  of  heterogeneous  goods,  it  is  the  total  utility 
less  the  sum  of  the  marginal  utilities,  which  are  themselves 
summated  in  so  far  as  there  are  supplies  as  well  as  single 
goods  in  the  collection.  An  individual's  consumer's  rent  is 
the  consumer's  rent  for  him  of  all  the  goods  he  possesses  or 
uses  added  together.  The  consumer's  rent  of  a  group  of 
individuals  may  be  conceived  as  the  sum  of  the  consumer's 
rents  of  its  members.  Total  utility  and  consumer's  rent  are 
concepts  equally  applicable  for  one  or  for  many  supplies, 
and  for  one  individual  or  for  society  as  a  whole.  I 


176     WELFARE  AS  AN  ECONOMIC  QUANTITY 

I  The  individual's  total  utility,  and  therefore  his  con- 
sumer's rent,  is  limited  by  his  capacity  to  enjoy.!  In  propor- 
tion to  the  primitiveness  of  the  man's  mind,  such  capacity 
may  be  small.  Large  capacity  may  be  favored  by  natural 
refinement  of  disposition  and  developed  by  educational  and 
other  opportunities.  But  the  man  of  refined  tastes  and 
sensibilities  has  an  increased  susceptibility  to  negative 
utility  which  is  not  entirely  within  his  control.  Thus  his 
effective  capacity  for  enjoyment  is  not  so  greatly  increased 
as  might  appear.  It  may  even  be  true  that  the  zero  level  in 
the  satisfaction  of  wants  is  a  mean,  and  that  positive  and 
negative  utility  are  relative  to  this  mean.  But  this  is  ex- 
treme. The  truth  is  doubtless  between  this  and  the  ordin- 
ary assumption  of  an  absolute  and  unchanging  zero.  Hence 
more  goods  do  or  may  mean  more  satisfaction,  even  after 
the  consumer  becomes  habituated  to  greater  material 
abundance  and  refinement.  Privation  is  not  altogether 
relative.  Total  capacity  is  not  a  fixed  or  inelastic  amount, 
the  same  for  every  one.  The  limitation  upon  it  is  not  a 
case  of  tantalism. 

Perhaps  the  practical  deduction  from  the  situation  is 
that,  after  fundamental  needs  are  well  provided  for,  better 
ordering  of  what  one  has  is  wiser  than  the  acquisition  of 
more  goods.  The  amount  of  consumer's  rent  is  elastic  and 
may  be  increased  indefinitely.  But  the  acquisition  of  a 
larger  number  of  goods,  however  varied,  is  not  the  surest 
way  to  increase  it.  The  study  of  complementary  relations 
and  the  keeping  of  marginal  subjective  costs  relatively  low, 
often  by  simplifying  one's  demand,  promise  better./ 

Society's  total  utility,  and  therefore  its  consumer's  rent, 
is  likewise  limited  by  capacity.  It  should  be  noted  that,  as 
used  in  the  term  "social  consumer's  rent,"  the  conception 
of  society  is  aggregate,  not  corporate.  Society  as  such  is 
not  a  consumer. 

Consumer's  rent  increases  with  the  expansion  of  the 
individual's  income  and  possessions.  The  increase  of  means 


CONSUMER'S  KENT  177 

makes  possible  the  acquisition  of  more  and  better  goods, 
and  the  goods  themselves  are  acquired  at  less  subjective 
cost,  having  therefore  a  lower  marginal  utility.  Let  us  con- 
sider, chiefly  by  way  of  review  and  synthesis  of  what  has 
already  been  said,  what  significance  for  satisfaction  the 
expansion  of  income  has,  taking  up  first  the  expansion  of 
the  income  of  the  individual,  and  secondly  that  of  society.] 
/  The  first  few  increments  of  income,  which  make  it  pos- 
sible to  keep  body  and  soul  together,  yield  no  consumer's 
rent.  Necessaries  in  the  strictest  sense,  which  are  neces- 
sary both  in  amount  and  kind,  give  no  net  satisfaction,  at 
any  rate  not  unless  mere  animal  appetite  dominates  exis- 
tence to  the  exclusion  of  human  qualities.)  If  the  amount 
of  such  goods  obtainable  is  more  than  is  absolutely  nec- 
essary, however,  the  surplus  may  be  made  the  means  of 
leisure.  Free  time  spent  in  idleness  may  be  a  sufficient 
source  of  satisfaction  to  an  undeveloped  being.  He  cannot 
have  even  so  much  unless  he  is  somewhat  released  from  the 
pressure  of  absolute  economic  necessity.  The  surplus  and 
the  leisure  must  be  habitual  and  familiar  before  advance 
steps  in  the  direction  of  the  refinement  of  consumption  are 
undertaken.  (Then  the  surplus  of  coarse  necessaries  is  re- 
duced in  order  to  obtain  variety  and  quality  and  interrela- 
tion in  the  articles  consumed.  Consumption  thus  comes  to 
have  human  interest.  The  same  ingenuity  that  diversifies 
and  refines  consumption  will  also  increase  man's  produc- 
\tive  powers;  it  is  bootless  to  attempt  to  say  which  sort  of 
progress  comes  first.  Thus  man  reaches  a  stage  where  he 
obtains  net  satisfaction  and  consumer's  rent.  Further  de- 
velopment in  the  variety  of  goods,  or  in  their  utilization, 
will  yield  further  satisfaction.  The  contribution  to  satis- 
faction, that  is,  the  utility  of  goods,  has  thus  been  increased 
by  the  addition  of  a  net  utility  which  did  not  exist  before. 
It  may  be  questioned  whether  the  initial  bare  necessaries 
have  any  utility,  humanly  speaking.!  It  is  true  in  more 
senses  than  one  that  the  physical  basis  of  life  is  not  life 


178     WELFAEE  AS  AN  ECONOMIC  QUANTITY 

itself.  Thus,  for  a  while,  total  utility  has  been  increasing 
faster  than  income  or  possessions.  During  the  process  of 
the  refinement  of  consumption  into  a  human  stage,  the 
total  utility  expands  at  least  in  proportion  to  income  or 
possessions,  and  the  net  utility  or  consumer's  rent  expands 
at  a  greater  rate  than  income.  This  is  the  stage  where  com- 
plementary utility  is  so  important,  since  the  refinement  of 
consumption,  narrowly  defined,  is  merely  preliminary  to 
the  cultivation  of  such  utilities,  and  if  broadly  conceived, 
the  former  includes  the  latter.  | 

The  above  description  smacks  of  primitive  conditions 
and  animal  appetites  in  such  a  way  as  may  suggest  that  it 
gives  the  writer's  conception  of  how  consumption  may  have 
evolved.  Perhaps  it  does,  but  it  is  intended  more  particu- 
larly to  apply  to  the  different  strata  of  present-day  society. 
If  there  is  no  class  in  the  United  States  whose  consumption 
is  confined  strictly  to  necessaries  as  defined  above,  there 
are  some  few  human  beings  near  enough  to  such  a  state  to 
make  clear  its  meaning,  both  as  regards  the  little  that  life 
can  yield  to  those  so  circumstanced  and  as  regards  the 
primitive  or  animal  nature  of  their  existence. 

Perhaps  a  given  individual  is  incapacitated  for  passing 
directly  from  such  a  status  to  a  better  economic  condition. 
But  we  find  other  individuals  in  the  somewhat  higher  social 
stratum  where  the  refinement  of  consumption  is  begun  and 
where  the  elements  of  human  conditions  of  life  are  at  hand. 
Still  higher  up,  the  cultivation  of  complementary  utilities 
may  be  sufficiently  favored  to  be  the  main  resource  of  con- 
sumption. Limitations  of  supply  are  still  felt,  but  the  follies 
of  certain  economico-social  ambitions  being  thus  fore- 
stalled, the  situation  may  be  the  better  for  the  necessary 
restraint. 

Parallel  with  the  refinement  of  consumption  and  with 
the  development  of  complementary  utilities  goes  greater 
emphasis  upon  durability  in  goods,  and  thus  upon  existen- 
tial utilities  as  sources  of  enjoyment.  This  also  is  a  phase  of 


CONSUMER'S  RENT  179 

the  evolution  of  consumer's  rent.  Below  is  barrenness  of  life, 
\and  beyond,  a  barrenness  of  goods  perhaps  equally  futile. 
The  danger  of  clogging  by  sheer  multiplicity  of  posses- 
sions, which  processive  enjoyments  escape,  is  lessened  by 
limitation  of  pecuniary  means./  A  due  proportion  between 
'  existential  and  processive  expenditure  will  still  obtain,  but 
the  proportion  will  naturally  be  more  in  favor  of  the  former 
as  the  situation  of  the  consumer  improves.  No  distinction 
need  here  be  made  between  this  development  and   the 
cultivation  of  multiple  utilities,  though  the  latter  is  of 
course  conditioned  by  degree  of  collective  intelligence. 
I     It  is  at  about  this  stage  that  a  given  absolute  amount  of 
)  income  normally  yields  its  maximum  absolute  amount  of 
j  utility.  It  is  probable,  too,  that  there  is  no  stage  where  thej 
net  amount  of  utility,  or  the  consumer's  rent,  is  greater.) 
An  abundance  of  goods  which  permits  casting  aside  moder- 
ation is  perhaps  too  rich  a  soil  for  the  hardier  growths  that 
are  alone  capable  of  making  thoroughly  positive  and  inde- 
pendent contributions  to  happiness. 

To  pursue  further  the  effect  of  the  expansion  of  the  indi- 
vidual's income  upon  his  total  utility  and  consumer's  rent 
is  scarcely  called  for.  The  rest  is  mainly  the  field  of  the 
delusions  of  adventitious  utility.  Too  many  men,  or  their 
representatives  in  consumption,  are  so  constituted  that 
they  fit  well  into  the  vanities  of  such  a  scheme  of  things 
and  lead  a  useless  life  without  the  consciousness  of  being 
the  pitiable  puppets  of  circumstance.  The  evils  of  adven- 
titious practices  and  institutions,  however,  are  of  less  im- 
portance as  regards  those  who  can  become  wholly  absorbed 
and  lost  in  them  than  as  regards  the  distraction  and  the 
loss  of  time  that  they  impose  on  really  capable  persons  who 
must  perforce  conform  somewhat  to  the  demands  of  their 
social  station  and  of  "society."  That  their  income  is  suffi- 
ciently large  to  press  them  to  do  so  is  their  misfortune,  a 
misfortune  which  in  terms  of  economics  means  not  merely 
that  the  enlarged  income  has  brought  little  or  no  additional 


180     WELFARE  AS  AN  ECONOMIC  QUANTITY 

utility,  but  that  it  has  reduced  the  amount  of  satisfaction 
below  that  which  is  obtainable  by  a  modest  and  self-con- 
tained economy.  To  have  little  enough  of  temporal  goods 
to  excuse  one  to  one's  self  and  others  for  exercising  a  ple- 
beian restraint  in  consumption  is  very  helpful. 

The  income  of  society,  also,  that  is,  the  net  amount  per 
capita  annually  available  for  consumption,  may  be  viewed 
as  expanding  through  the  various  stages  from  privation  to 
superabundance.  Since  the  distribution  will  not  be  even, 
the  privation  or  superabundance  must  be  supposed  to  be 
an  average  or  per  capita  condition. 

/     The  measure  of  utility  is  still  contribution  to  satisfaction. 

/  Increase  of  values  is  not  significant]  Whether  an  increase 

I  of  values  will  actually  accompany  abundance  or  super- 

|  abundance  of  goods  is  a  question  whose  answer  depends 

|  altogether  upon  what  is  meant  by  value,  and  in  particular 

/   upon  whether  commercial  value  is  in  some  sense  absolute  or 

I    merely  a  measure  of  relative  power  in  exchange.   In  the 

«    case  of  national  wealth,  however,  complete  subsumption 

under  exchange  value  is  not  usual  among  economists.   It 

would  be  generally  admitted  that  national  wealth  is  not 

adequately  measured  by  the  sum  of  values.  The  ground  is 

thus  prepared  for  the  standpoint  of  utility.\ 

There  are  wastes  and  economies  possible  in  the  consump- 
tion of  a  social  group  which  do  not  appear  in  the  individual's 
consumption  considered  abstractly  by  itself.  The  great 
social  waste  is  adventitious  consumption,  which  has  al- 
ready been  sufficiently  discussed.  There  is  need  of  a  moral 
awakening  in  this  particular. 

/  The  greatest  social  economy  possible  to  effect  in  con- 
sumption lies  in  the  direction  of  developing  multiple  utili- 
aies.j  This  also  has  been  discussed.  Those  things  which  are 
adapted  to  furnishing  multiple  utility  afford  unlimited 
scope  for  the  future  evolution  of  consumption.  The  pos- 
sibilities would  be  greater  still  if  human  nature  should 
ever  become  such  that  men  could  be  entirely  trusted  to 


CONSUMER'S  RENT  181 

exercise  care  in  the  use  of  things  not  their  own  private 
property. 

In  so  far  as  the  average  is  also  the  typical  and  usual  situ- 
ation as  regards  the  distribution  of  wealth,  that  is,  in  so  far 
as  we  can  suppose  equality  to  hold  for  the  various  stages 
of  our  hypothetical  comparison,  the  effect  of  the  expan- 
sion of  national  wealth  will  be  simply  the  sum  of  the  effects 
on  individuals,  with  one  or  two  important  qualifications. 
Adventitious  utility  flourishes  best  in  an  atmosphere  of 
inequalities,  hence  there  would  be  little  encouragement 
to  its  growth  under  the  conditions  supposed.  Economic 
equality  would,  on  the  other  hand,  favor  as  much  as 
possible  cooperative  enterprises  in  consumption  and  the 
cultivation  of  multiple  utility.  In  fact,  it  is  to  be  doubted 
whether  any  better  use  could  be  found  for  greatly  increased 
individual  means  than  to  turn  the  surplus  over  to  volun- 
tary associations  or  to  the  community  for  expenditure  upon 
objects  of  multiple  utility.  The  unimputable  utilities  of  a 
fortunate  natural  environment  can  also  be  the  more  surely 
preserved  and  treasured,  and  the  better  cared  for,  by  a 
society  having  abundance  of  material  resources  obtainable 
without  exhaustive  use  of  nature's  gifts,  and  without  the 
incentive  to  selfish  ambition  fomented  by  inequality. 

If  along  with  abundance  or  superabundance  of  wealth, 
however,  there  comes  a  high  degree  of  economic  inequality, 
the  situation  will  be  quite  different.  The  increase  of  means 
will  bring  greatly  increased  expenditure  for  multiple  utili- 
ties, either  from  the  philanthropic  gifts  of  the  rich  or  from 
the  proceeds  of  taxation.  But  some  of  the  public  expenditure 
even  is  likely  to  be  tainted  with  elements  of  adventitious 
utility.  Moreover,  the  state  of  mind  of  the  people  will  prob- 
ably be  so  influenced  by  the  adventitious  practices  of  the 
rich  in  personal  expenditure  that  they  will  not  appreciate 
institutions  of  multiple  utility  as  they  should.  They  will  not 
care  for  them  as  for  their  own,  and  the  expenses  of  adminis- 
tration of  such  utilities  will  therefore  be  unduly  high.  The 


182     WELFARE  AS  AN  ECONOMIC  QUANTITY] 

ambition  to  be  rich  and  to  Indulge  in  wasteful  and  adventi- 
tious expenditure,  and  the  reflected  bitterness  and  envy  of 
those  not  able  to  compete,  will  taint  life  more  and  more  in 
proportion  to  abundance  if  a  high  degree  of  inequality  goes 
with  it.  The  leaders  of  society  will  be  only  the  more  effec- 
tive as  leaders  to  destruction.  In  the  early  stages  of  econo- 
mic evolution,  such  was  not  the  caseJ  When  it  was  possible 
for  only  a  few  to  have  leisure,  inequality  was  necessary  to 
progress.  Where  all  can  have  leisure,  a  marked  degree  of 
inequality  of  economic  means  is  not  necessary  for  leader- 
ship, and  it  is  likely  to]  signify  instead  a  bad  example  set 
by  the  idle  rich.  / 

It  was  the  great  fault  of  the  classical  school  of  economic 
thought  —  a  defect  frequently  shared  by  their  severest 
critics  —  that  it  assumed  that  maximum  production,  or 
maximum  income  and  possessions,  was  the  end  and  crite- 
rion of  the  economic  activities  of  society.  As  a  rough  first 
step  in  analysis  this  is  not  bad.  But|  looking  beyond  eco-  ^ 
nomic  or  exchange  value  to  the  utility  from  which  it  has 
its  being,  we  find  it  is  not  to  be  taken  for  granted  that  maxi- 
mum utility  results  from  maximum  wealth.  All  depends 
upon  the  distribution  of  wealth.}  Assuming  a  high  degree  of 
abundance  as  a  possibility  for  all  or  most  of  the  members  of  I 
society,  then  the  most  desirable  state  of  distribution  is  one  i 
of  approximate  equality/  Wealth  that  is  put  to  a  use  that' 
has  only  necessarily  and  instinctively  transputed  utility 
serves  no  human  purpose.  It  is  wasted.  Still  clearer  and 
greater,  in  an  advanced  stage  of  economic  evolution,  is  the 
waste  of  the  wealth  that  serves  only  adventitious  ends. 
Real  utility  lies  between  these  extremes.  \In  order  to  ob^f 
tain  the  greatest  amount  of  true  utility  from  a  giveq 
amount  of  wealth,  it  should  be  so  distributed  as  to  constif 
tute  only  moderate  incomes.  I 

Not  only  total  true  utility,  but  the  consumer's  rent 
composed  of  such  utility  —  and  it  is  properly  composed  of 
Nothing  else  —  will  thus  be  greatest  in  a  society  where 


CONSUMER'S  RENT  183 

wealth  is  evenly  distributed.  The  lowest  social  classes  are 
at  a  disadvantage  in  their  attempts  to  obtain  consumer's 
rent,  not  only  on  account  of  the  transputation  of  utility 
due  to  their  necessities,  but  also  on  account  of  high  costs 
and  high  marginal  utility.  The  very  rich,  on  the  other 
hand,  often  obtain  no  true  utility  from  their  great  riches, 
therefore  a  fortiori  no  net  utility! 

One  very  important  effect  of  the  increase  of  income  and 
possessions  is  sometimes  forgotten,  that  is,  its  bearing  on 
the  utility  of  leisure  or  of  free  time.1  As  goods  become  more 
and  more  abundant,  further  goods  are  less  desirable  than 
further  free  time,  the  marginal  utility  of  goods  as  compared 
with  the  marginal  utility  of  leisure,  so  to  speak,  declining 
till  preference  is  given  to  free  time{  As  goods  accumulate,  \ 
it  is  to  be  expected  that  both  more  thought  and  more  time 
should  be  given  to  making  use  of  them.  In  so  far  as  it  is  / 
true  that  labor  and  life,  or  enjoyment,  will  not  mingle,  an/ 
increase  in  the  productiveness  of  labor  that  does  not  bring 
greater  leisure  is  wrong  somewhere.  \ 

Control  and  management  of  goods,  or  material  means  of 
-elfare,  constitute  the  essence  of  economy.   The  science 
f  economics,  therefore,  in  so  far  as  it  inculcates  anything, 
—  as  it  is  bound  to  do,  not  directly,  but  by  implication,  — 
caches  the  limitation  of  individual  accumulation.    It 
points  towards  simplicity  of  life,  not  in  the  perverted 
ense  of  doing  without  worldly  goods,  but  in  the  sense  of 
xercising  moderation  or  restraint  in  their  accumulation.! 
If  the  older  economics  appeared  to  support  the  contrary 
principle,  this  was  because  it  occupied  itself  too  much  with 
production.    Goods  should  be  valued  by  their  possessor 
only  as  there  is  time  and  energy  to  make  use  of  them.  This 
is  just  as  true  as  is  the  converse  proposition  that  material 
means  are  required  in  order  to  make  anything  of  time  and 
life.  That  most  may  be  made  of  life  by  those  who  are  not 
bothered,  and  do  not  bother  themselves,  with  either  ex- 
treme of  poverty  or  riches  is  a  truth  seldom  seen  whole^ 


CHAPTER    XVIII 

OF  CERTAIN  PRACTICAL  APPLICATIONS 

THE  writer  is  only  secondarily  concerned  with  the  practical 
application  of  the  theories  above  discussed.  But  he  could 
not  conceal,  if  he  would,  the  significance  of  this  examina- 
tion of  the  variation  of  utility  for  passing  judgment  upon 
the  wastefulness,  at  both  extremes  of  the  social  scale,  of 
the  present  economic  order.  Especially  direct  and  clear 
is  its  bearing  upon  the  expenditures  of  the  rich,  and  upon 
the  justifiability  of  such  a  division  of  the  social  income  as 
turns  so  much  of  it  to  adventitious  use. 

To  say  that  enjoyment  (or  utility)  does  not  increase  in 
proportion  as  riches  or  property  increase  is  to  reiterate  a 
commonplace  of  economic  discussion.  It  is  to  be  presumed 
that  this  proposition  has  received  some  accession  of  con- 
tent and  meaning  from  the  foregoing  chapters.  The  diminu- 
tion of  utility  at  a  diminishing  rate,  though  fundamental, 
falls  much  short  of  the  whole  truth,  yet  even  with  only  so 
much  established,  the  passing  of  judgment  upon  an  eco- 
nomic institution  merely  with  reference  to  the  magnitude 
of  its  physical  contribution  to  production  is  presumptuous. 
Free  trade  has  often  been  praised  too  much  and  socialism 
too  much  condemned  on  such  a  basis.  It  is  no  sufficient 
excuse  that  insight  into  the  tendencies  and  effects  of  pro- 
duction in  relation  to  possibilities  of  rational  enjoyment 
is  not  easy  to  obtain. 
/  "The  chief  enjoyment  of  riches  consists  in  the  parade 

/of  riches."  1  Adam  Smith  thus  tersely  puts  the  point  that 
r 

I  l  "With  the  greater  part  of  rich  people,  the  chief  enjoyment  of  riches 
Consists  in  the  parade  of  riches,  which  in  their  eye  is  never  so  complete  as 
ivhen  they  appear  to  possess  those  decisive  marks  of  opulence  which  no- 


OF  CERTAIN  PRACTICAL  APPLICATIONS     185 

s  we  have  developed  in  detail  as  a  doctrine  of  adventitious 
\utility.  So  far  as  these  words  are  true,  riches  serve  no 
worthy  purpose.)  They  do  hold  true  for  the  majority  of  the 
very  rich,  some  of  whom  have  such  ends  more  or  less  con- 
sciously before  them,  while  many  merely  conform  to  con- 
ventional standards  and  demands  of  fashion  which  are 
themselves  determined  by  adventitious  motives  and  ten- 
dencies. Only  for  a  minority  are  the  acquisition  and  use  of 
riches  incidents  of  activities  more  rational  and  more  moral. 
The  typical  forms  of  expenditure  of  the  very  rich  are  thus 
at  best  wasteful  and  at  worst  anti-social.  They  arouse 
jealousy  and  envy,  and  evidence  an  unfeeling  lack  of 
imagination  for  the  effect  upon  others  of  such  conduct. 
Even  where  the  idle  rich  kill  time  with  the  aid  of  the  fine 
arts,  they  demoralize  taste  with  ostentation.  Their  bid- 
ding-up  of  the  price  of  curios  and  rarities  of  all  sorts  meas- 
ures their  lack  of  moderation.  But  their  capricious  monop- 
olization of  certain  rare  articles  shows  more  discrimination 
than  most  of  their  activities  do.  Nevertheless,  it  too  often 
takes  these  articles  away  from  their  natural  setting  and 
deprives  them  of  a  portion  of  their  real  complementary 
utility.  The  expenditures  of  the  rich  commonly  disturb 
the  equilibrium  of  prices  for  goods  and  services  and  give 
the  merchant  too  much  training  in  exploiting  his  customers 
through  charging  what  the  traffic  will  bear. 

While  we  may  thus  properly  condemn  the  ordinary 
forms  of  expenditure  of  the  rich,  and  thus  to  a  degree  riches 
themselves,  —  for  their  justification  must  depend  upon 
their  having  a  social  function,  —  it  is  not  therefore  nec- 
essarily true  that  execution  should  follow  judgment.  No 
public  agency  can  be  trusted  to  prescribe  the  direction 
expenditure  shall  take.  Even  so,  sumptuary  laws  would  be 
but  palliatives.  Legislation  would  do  better  to  attack  the 
root  of  the  evil,  that  is,  the  inequality  in  the  distribution 

tody  can  possess  but  themselves."  Wealth  of  Nations,  book  I,  chap,  xi, 
gart  n,  p.  173. 


186     WELFARE  AS  AN  ^ECONOMIC  QUANTITY 

of  wealth.  It  is  likely  that  the  state  will  soon  do  this, 
largely  through  its  fiscal  policies  and  through  reformation 
of  the  laws  of  inheritance.  This  would  amount  merely  to 
carrying  out  policies  in  which  the  first  steps  have  already 
been  taken.  ; 

The  rich,  and  especially  the  rich  in  America,  have  not 
been  so  lacking  in  intelligence  as  altogether  to  fail  to  see 
the  vanity  and  futility  of  adventitious  expenditure  or  of 
the  attempt  entirely  to  dispose  of  their  surplus  for  merely 
personal  ends.  Convention  and  fashion  blind  men  all  too 
easily  to  the  presence  of  adventitious  utility.  But  the 
absence  of  an  aristocratic  tradition  of  high  life  and  idle- 
ness here  has  made  the  situation  somewhat  better  than  it 
is  in  other  countries.  Rich  men  who  want  something  for 
their  money,  and  who  are  also  not  averse  to  making  their 
aims  social  rather  than  merely  personal,  have  often  de- 
voted their  resources  to  philanthropic  and  educational 
purposes  on  a  scale  unknown  before.  They  should  receive 
due  credit  for  their  intelligence  and  public-spiritedness, 
whether  their  motive  be  pure  altruism  or  in  part  enlight- 
ened egoism. 

It  is  conceivable  that  their  public-spiritedness  might 
carry  some  of  them  so  far  as  to  leave  for  their  children  un- 
earned property  and  income  only  in  such  amount  as  to 
put  them  without  labor  on  a  level  with  the  members  of 
the  professional  classes,  who  live  comfortably  but  who  do 
so  only  because  of  their  daily  labor  for  society.  If  so,  such 
a  consummation  would  certainly  be  no  calamity,  either 
for  their  descendants  or  for  the  rest  of  society.  Here  is  the 
proper  criterion,  perhaps,  for  the  just  limit  on  the  amount 
of  property  and  income  inheritable  by  a  single  individual. 
[The  permanent  incomes  received  by  inheritance  or  gift 
(should  not  exceed  the  limit  of  the  greatest  earned  incomes 
las  determined  by  the  highest  salaries  paid  for  industrial 
lor  other  services]  An  inherited  income  of  $100,000  a  year 
is  plenty.  Society  would  be  benefited  all  around  if,  by  a 


OF  CERTAIN  PRACTICAL  APPLICATIONS      187 

well-devised  fiscal  policy,  and  by  the  regulation  of  inheri- 
tance, the  state  should  gradually  make  effective  some  such 
limitation,  thus  preventing  an  inverse  selection  of  individ- 
uals and  families  to  receive  the  greatest  amount  of  riches, 
that  is,  a  selection  favoring  those  least  inclined  by  he- 
redity or  by  familiar  example  to  philanthropy  and  public 
spirit.  American  millionaires  are  distinguished  for  gener- 
ous philanthropy  perhaps  largely  because  they  are,  to  so 
great  an  extent,  of  the  "new  rich."  It  has  been  observed 
that  the  oldest  of  our  multi-millionaire  families  are  not 
notably  philanthropic. 

This  is  by  no  means  the  same  as  saying  that  the  institu- 
tion of  inheritance  is  of  no  benefit  to  society  and  ought  to 
be  abolished.  Its  value  to  society  is  of  the  same  order  as 
is  the  value  of  the  educational  advantages  freely  given  by 
parents  to  their  children.  It  has  therefore  played  a  leading 
part  in  the  evolution  of  civilization.  There  is  no  reason  to 
suppose  its  usefulness  is  at  an  end.  But  that  usefulness  is 
nowise  proportioned  to  the  amount  of  property  given  or 
transmitted  to  the  individual  beneficiary.  Quite  the  con- 
trary is  true.  A  limited  amount  of  inherited  property  is 
of  greater  benefit  to  the  individual  by  reason  of  the  limita- 
tion. The  extent  of  the  benefit  conferred,  moreover,  is 
thereby  multiplied,  for  the  number  of  direct  beneficiaries 
becomes  proportionate  to  the  total  amount  of  riches. 
Whatever  of  reflected  value,  also,  the  institution  may  have 
for  society  is  thus  more  generally  diffused.  If  the  time 
ever  comes  when  nobody  can  be  a  multi-millionaire  by 
inheritance,  the  institution  will  be  of  greater  social  value 
than  now. 

Both  ethics  and  economics  must  go  beyond  positive  law 
and  examine  its  grounds.  Legal  rights  are  subject  to 
evolution.  Of  their  very  nature,  moreover,  as  based  upon 
precedent,  they  may  be  presumed  to  be  in  chronic  need 
of  reform.  The  evolution  of  abstract  property,  of  which 
securities  are  the  familiar  type,  has  somewhat  changed  the 


188     WELFAKE  AS  AN  ECONOMIC  QUANTITY 

situation  from  what  it  was  in  the  days  of  Locke  and  of 
England's  17th  century  revolutions  in  defense  of  "life, 
liberty,  and  property."  That  is  a  significant  alteration 
which  the  Declaration  of  Independence  made  in  this 
phrase,  substituting  for  property  "the  pursuit  of  hap- 
piness." Are  existing  laws  in  relation  to  property  and  its 
inheritance  merely  such  as  protect  the  rights  of  the  indi- 
vidual in  his  pursuit  of  happiness?  If  not,  what  modes  of 
division  of  the  social  income  will  most  facilitate  such  an 
end?  !lf  the  right  of  private  property  is  essential  to  the 
right 'to  the  pursuit  of  happiness  in  so  far  as  happiness 
depends  upon  the  control  of  material  means,  —  which  is 
but  another  way  of  putting  Locke's  idea  that  a  man  should 
have  property  in  that  with  which  he  has  mixed  his  labor, 
—  and  if  that  right  is  defensible  only  in  so  far  as  it  is  thus 
essential,  then  the  desirability  of  certain  changes  in  prop- 
erty rights  must  be  deduced  from  the  foregoing  discus- 
sion. A  change  in  law  and  public  policy  with  regard  to  the 
inheritance  of  large  fortunes  is  what  seems  to  be  particu- 
larly needed.  That  the  evolution  of  forms  of  property 
right  has  very  much  altered  the  situation  from  what  it  was 
a  few  hundred  years  ago  is  significant  in  this  connection, 
but  not  pertinent  to  our  study  of  consumption. 

These  pages  contain  some  remarks  about  the  rich  which 
may  be  regarded  as  uncomplimentary.  They  have  where- 
with to  console  themselves,  and  wherewith  to  conciliate 
more  respect  of  a  certain  sort  than  is  their  due.  But  in 
order  that  we  may  not  appear  to  exhibit  partiality  and  to 
discriminate  unfairly  in  our  remarks  touching  invidious 
motives  and  adventitious  ends,  we  should  add  that  the 
ambition  to  be  and  "to  do"  rich,  as  that  would  ordinarily 
have  to  be  interpreted  in  the  concrete,  puts  the  one  so 
absorbed  into  the  same  class  morally  with  those  who  are 
successful  in  this  ambition.  The  category  is  no  doubt  very 
inclusive.  Human  nature  in  general  is  absurdly  invidious 
in  its  judgments  and  aspirations.  The  social  fabric  and 


OF  CERTAIN  PRACTICAL  APPLICATIONS     189 

the  daily  practices  of  men  are  permeated  through  and 
through  with  wasteful  vanities  and  trivial  ambitions. 
The  economic  evils  resulting  are  most  noticeable,  not 
where  inclination  is  strongest,  but  where  opportunity  is 
greatest.  Those  who  are  successful  in  achieving  riches  are 
on  the  whole  only  the  more  efficient  ones  in  a  large  class, 
the  other  members  of  which  are  not  morally  better  but 
only  less  able  than  they.  Lest  this  be  undue  praise,  how- 
ever, let  us  hasten  to  add  that  practical  efficiency  is  often 
made  such  by  narrowness,  whether  natural-born  or  due 
to  force  of  circumstances.  This  disease  of  adventitious 
enjoyment  ought  to  be  in  large  part  curable  by  enlight- 
enment, but  some  traces  of  the  evil  must  remain  till 
Jiuman  nature  itself  is  made  over. 

There  is  another  phase  of  waste  of  utility  besides  that 
due  to  the  traditional  follies  of  the  rich,  perhaps  equally 
important  in  magnitude.  At  the  lower  end  of  the  economic 
scale  are  those  whose  consumption  maintains  their  exist- 
ence, but  who  are  not  able  to  live  humanly.  As  a  minus 
quantity  is  less  than  zero,  so  bare  subsistence  is,  from  an 
economic  point  of  view,  worse  than  the  cessation  of 
existence.  | 

If  it  is  less  easy  to  make  some  practical  application  of 
this  fact  than  it  is  of  the  knowledge  of  evil  conditions  at 
the  other  end  of  the  social  scale,  that  should  not  make  us 
less  ready  to  look  the  fact  in  the  face.  We  must  recognize 
that  the  waste  of  life  through  the  continuance  and  mul- 
tiplication of  existences  at  the  lower  extremity  of  society 
is  not  merely,  indeed  not  mainly,  an  economic  question. 
Humanitarian  considerations  may  properly  count  for  more 
than  economic  reasons  here,  while,  in  the  case  of  the  ex- 
penditure of  the  rich,  economic  reasons  afford  the  suffi- 
cient basis  for  judgment.  Our  own  humanity  —  something 
quite  different  from  pity  for  the  sufferings  of  the  poorest 
or  (objectively)  most  miserable  —  is  reasonably  what  pre- 
vents society  from  putting  them  out  of  the  way  by  the  use 


190     WELFARE  AS  AN  ECONOMIC  QUANTITY 

of  chloroform  or  some  equivalent  means.  So  nature  is  left 
to  perform  the  operation  without  the  use  of  an  anaesthetic. 
In  this  economic  essay  we  may  be  excused  from  even  sug- 
gesting a  solution  for  so  large  a  sociological  problem. 
Hence  the  greater  space  devoted  to  the  essentially  eco- 
nomic problem  at  the  other  extreme  of  society. 

The  use  of  goods  to  maintain  life  where  there  are  no  fur- 
jther  goods  to  make  Me  worth  maintaining  is  an  economic 
(absurdity.  /  The  reckoning  of  the  value  of  such  beings  to 
society  is  one  of  the  curious  misapplications  of  the  concept 
of  economic  value.  A  man  may  have  much  value  to  his 
fellows,  but  it  is,  or  ought  to  be,  chiefly  other  than  eco- 
nomic. The  value  of  men  to  one  another,  also,  is  reciprocal 
and  complementary,  hence  not  to  be  arrived  at  by  inven- 
tory. So  far  as  the  value  of  one  man  to  another  is  economic, 
the  net  amount  must  often  be  negative.  The  loss  of  the 
"value"  of  a  man  should  be  compared  with  the  effect  on  a 
balance-sheet  of  wiping  out  asset  and  corresponding  liabil- 
ity at  the  same  time.  Certainly  society  is  indebted  to 
every  man  for  something,  but  every  man  is  in  turn  the 
beneficiary  of  society.  The  balance  or  net,  even  on  the 
average,  is  not  at  all  times  and  places  in  favor  of  society. 
If  the  "  submerged  tenth "  receives  little  from  society,  its 
members  usually  give  even  less,  f  Their  existence  is,  also, 
humanly  speaking,  worth  nothing  to  themselves.  If  it  may 
be  made  so  to  others,  by  what  right?  A  system  of  slave 
labor  might  use  them,  but  a  free  and  inclusive  democratic 
society  cannot. 

Thus  democracy  is  a  society  of  peers.  A  democrat  is  not 
a  leveler.  He  would,  it  is  true,  destroy  causes  of  artificial 
elevation.  But  as  regards  personal  qualities,  his  standard 
for  membership  in  this  society  of  peers  may  be  as  high  and 
as  exclusive  as  his  ideals  will  make  it.  The  standard  may 
easier  be  high  than  low.  He  is  no  democrat  who  claims  for 
the  naturally  inferior  equal  rights.  The  democrat  would 
have  all  equals,  and  all  worthy  to  be  so.  He  would  there- 


r 


OF  CERTAIN  PRACTICAL  APPLICATIONS      191 

fore  abolish  the  inferior.  He  would  have  no  hierarchies.  He 
has  no  use  for  the  lord,  or  the  vassal,  or  the  slave.  Patern- 
alism and  paternal  or  Tory  socialism  do  find  places  for  the 
inferior  and  for  natural  slaves.  True  democracy  cannot. 
The  democrat  will  not  use  a  fellow- man  for  merely  per- 

>nal  ends. 

Our  conclusions  —  that  the  means  of  bare  existence  are 
of  no  utility  or  of  contingent  utility  only,  that  moderate 
incomes  are  good  in  themselves  and  good  for  society,  and 
that  great  incomes,  especially  great  inherited  incomes, 
mean  principally  a  waste  of  utilities  —  are  an  incidental 
outcome  of  this  analysis  of  the  modes  of  variation  of  util- 
ity. |That  we  are  thus  brought  to  the  "golden"  mean  as  an 
ideal  of  economics  is  interesting.  This  rule  of  moderation 
should  work  both  ways.  Adequacy  of  means  and  simplicity 
in  the  conduct  of  life  meet  at  this  point.  But  modern 
preaching,  neglectful  enough  of  both  sides,  is  especially 
afraid  of  one  half  of  this  conclusion.  That  it  is  as  difficult 
for  the  rich  man,  in  propria  persona,  to  enter  heaven  as  for 
the  camel  to  pass  through  the  needle's  eye  is  true,  but  so 
also  is  the  view  of  Aristotle,  that  virtue  and  happiness 
plainly  require  adequate  means,  including  economic  goods./ 


THE  END 


ftitoergi&e 

CAMBRIDGE  .  MASSACHUSETTS 
U   .   S    .  A 


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